Correlation Between United Utilities and AcadeMedia

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

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

Diversification Opportunities for United Utilities and AcadeMedia

-0.52

Correlation Coefficient

United Utilities  AcadeMedia

Excellent diversification

The 3 months correlation between United and AcadeMedia is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and AcadeMedia AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AcadeMedia AB and United Utilities 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 United Utilities Group are associated (or correlated) with AcadeMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AcadeMedia AB has no effect on the direction of United Utilities i.e., United Utilities and AcadeMedia go up and down completely randomly.

Pair Corralation between United Utilities and AcadeMedia

Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.92 times more return on investment than AcadeMedia. However, United Utilities Group is 1.09 times less risky than AcadeMedia. It trades about 0.03 of its potential returns per unit of risk. AcadeMedia AB is currently generating about 0.01 per unit of risk. If you would invest  102,012  in United Utilities Group on September 27, 2024 and sell it today you would earn a total of  2,338  from holding United Utilities Group or generate 2.29% return on investment over 90 days.

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

United Utilities Group  vs.  AcadeMedia AB

United Utilities

Risk-Adjusted Performance

2 of 100

Insignificant

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

AcadeMedia AB

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days AcadeMedia AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AcadeMedia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United Utilities and AcadeMedia

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

The idea behind United Utilities Group and AcadeMedia AB 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.