Correlation Between United Utilities and Reckitt Benckiser

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

Diversification Opportunities for United Utilities and Reckitt Benckiser

0.0

Correlation Coefficient

United Utilities  Reckitt Benckiser

Pay attention - limited upside

The 3 months correlation between United and Reckitt is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Reckitt Benckiser Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reckitt Benckiser 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 Reckitt Benckiser. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reckitt Benckiser has no effect on the direction of United Utilities i.e., United Utilities and Reckitt Benckiser go up and down completely randomly.

Pair Corralation between United Utilities and Reckitt Benckiser

If you would invest  101,818  in United Utilities Group on September 26, 2024 and sell it today you would earn a total of  2,532  from holding United Utilities Group or generate 2.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

United Utilities Group  vs.  Reckitt Benckiser Group

United Utilities

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United Utilities Group are ranked lower than 3 (%) 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.

Reckitt Benckiser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reckitt Benckiser Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Reckitt Benckiser is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United Utilities and Reckitt Benckiser

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

The idea behind United Utilities Group and Reckitt Benckiser 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.