Correlation Between United Utilities and Beeks Trading

Can any of the company-specific risk be diversified away by investing in both United Utilities and Beeks Trading 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 Beeks Trading 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 Beeks Trading, you can compare the effects of market volatilities on United Utilities and Beeks Trading 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 Beeks Trading. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Beeks Trading.

Diversification Opportunities for United Utilities and Beeks Trading

-0.02

Correlation Coefficient

United Utilities  Beeks Trading

Good diversification

The 3 months correlation between United and Beeks is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Beeks Trading in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beeks Trading 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 Beeks Trading. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beeks Trading has no effect on the direction of United Utilities i.e., United Utilities and Beeks Trading go up and down completely randomly.

Pair Corralation between United Utilities and Beeks Trading

Assuming the 90 days trading horizon United Utilities Group is expected to generate 0.42 times more return on investment than Beeks Trading. However, United Utilities Group is 2.37 times less risky than Beeks Trading. It trades about 0.13 of its potential returns per unit of risk. Beeks Trading is currently generating about 0.03 per unit of risk. If you would invest  100,939  in United Utilities Group on September 3, 2024 and sell it today you would earn a total of  11,011  from holding United Utilities Group or generate 10.91% return on investment over 90 days.

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

United Utilities Group  vs.  Beeks Trading

United Utilities

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, United Utilities may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Beeks Trading

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with United Utilities and Beeks Trading

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

The idea behind United Utilities Group and Beeks Trading 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.