Correlation Between UNITIL and NorthWestern

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

By analyzing existing cross correlation between UNITIL and NorthWestern, you can compare the effects of market volatilities on UNITIL and NorthWestern 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 UNITIL with a short position of NorthWestern. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITIL and NorthWestern.

Diversification Opportunities for UNITIL and NorthWestern

0.5

Correlation Coefficient

UNITIL  NorthWestern

Very weak diversification

The 3 months correlation between UNITIL and NorthWestern is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding UNITIL and NorthWestern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWestern and UNITIL 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 UNITIL are associated (or correlated) with NorthWestern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthWestern has no effect on the direction of UNITIL i.e., UNITIL and NorthWestern go up and down completely randomly.

Pair Corralation between UNITIL and NorthWestern

Considering the 90-day investment horizon UNITIL is expected to generate 8.82 times less return on investment than NorthWestern. In addition to that, UNITIL is 1.38 times more volatile than NorthWestern. It trades about 0.0 of its total potential returns per unit of risk. NorthWestern is currently generating about 0.03 per unit of volatility. If you would invest  5,375  in NorthWestern on August 30, 2024 and sell it today you would earn a total of  97.00  from holding NorthWestern or generate 1.8% return on investment over 90 days.

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

UNITIL  vs.  NorthWestern

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.

NorthWestern

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NorthWestern are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, NorthWestern is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with UNITIL and NorthWestern

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

The idea behind UNITIL and NorthWestern 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.