Correlation Between Otter Tail and UNITIL

Can any of the company-specific risk be diversified away by investing in both Otter Tail and UNITIL at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Otter Tail and UNITIL into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Otter Tail and UNITIL, you can compare the effects of market volatilities on Otter Tail and UNITIL and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Otter Tail with a short position of UNITIL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Otter Tail and UNITIL.

Diversification Opportunities for Otter Tail and UNITIL

0.32

Correlation Coefficient

Otter Tail  UNITIL

Weak diversification

The 3 months correlation between Otter and UNITIL is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Otter Tail and UNITIL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITIL and Otter Tail is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Otter Tail are associated (or correlated) with UNITIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITIL has no effect on the direction of Otter Tail i.e., Otter Tail and UNITIL go up and down completely randomly.

Pair Corralation between Otter Tail and UNITIL

Given the investment horizon of 90 days Otter Tail is expected to under-perform the UNITIL. But the stock apears to be less risky and, when comparing its historical volatility, Otter Tail is 1.01 times less risky than UNITIL. The stock trades about -0.04 of its potential returns per unit of risk. The UNITIL is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5,987  in UNITIL on August 30, 2024 and sell it today you would lose (37.00) from holding UNITIL or give up 0.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Otter Tail  vs.  UNITIL

Otter Tail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otter Tail has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Otter Tail is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

UNITIL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITIL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, UNITIL is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Otter Tail and UNITIL

The main advantage of trading using opposite Otter Tail and UNITIL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Otter Tail position performs unexpectedly, UNITIL can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in UNITIL will offset losses from the drop in UNITIL's long position.

The idea behind Otter Tail and UNITIL pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.