Correlation Between SOCGEN and United Utilities

Can any of the company-specific risk be diversified away by investing in both SOCGEN and United Utilities 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 SOCGEN and United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SOCGEN 2797 19 JAN 28 and United Utilities Group, you can compare the effects of market volatilities on SOCGEN and United Utilities 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 SOCGEN with a short position of United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOCGEN and United Utilities.

Diversification Opportunities for SOCGEN and United Utilities

0.47

Correlation Coefficient

SOCGEN  United Utilities

Very weak diversification

The 3 months correlation between SOCGEN and United is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding SOCGEN 2797 19 JAN 28 and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities and SOCGEN 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 SOCGEN 2797 19 JAN 28 are associated (or correlated) with United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of SOCGEN i.e., SOCGEN and United Utilities go up and down completely randomly.

Pair Corralation between SOCGEN and United Utilities

Assuming the 90 days trading horizon SOCGEN 2797 19 JAN 28 is expected to under-perform the United Utilities. In addition to that, SOCGEN is 1.13 times more volatile than United Utilities Group. It trades about -0.3 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.09 per unit of volatility. If you would invest  1,286  in United Utilities Group on September 17, 2024 and sell it today you would earn a total of  108.00  from holding United Utilities Group or generate 8.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	20.31%
Values	Daily Returns

SOCGEN 2797 19 JAN 28  vs.  United Utilities Group

SOCGEN 2797 19

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOCGEN 2797 19 JAN 28 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for SOCGEN 2797 19 JAN 28 investors.

United Utilities

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, United Utilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SOCGEN and United Utilities

The main advantage of trading using opposite SOCGEN and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SOCGEN position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.

The idea behind SOCGEN 2797 19 JAN 28 and United Utilities Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.