Correlation Between United Utilities and Artesian Resources

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

Diversification Opportunities for United Utilities and Artesian Resources

-0.53
  Correlation Coefficient

Excellent diversification

The 3 months correlation between United and Artesian is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities Group and Artesian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artesian Resources 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 Artesian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artesian Resources has no effect on the direction of United Utilities i.e., United Utilities and Artesian Resources go up and down completely randomly.

Pair Corralation between United Utilities and Artesian Resources

Assuming the 90 days horizon United Utilities Group is expected to generate 0.99 times more return on investment than Artesian Resources. However, United Utilities Group is 1.01 times less risky than Artesian Resources. It trades about 0.09 of its potential returns per unit of risk. Artesian Resources is currently generating about -0.12 per unit of risk. If you would invest  1,286  in United Utilities Group on September 14, 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 Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy98.44%
ValuesDaily Returns

United Utilities Group  vs.  Artesian Resources

 Performance 
       Timeline  
United Utilities 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
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.
Artesian Resources 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Artesian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

United Utilities and Artesian Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with United Utilities and Artesian Resources

The main advantage of trading using opposite United Utilities and Artesian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities position performs unexpectedly, Artesian Resources 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 Artesian Resources will offset losses from the drop in Artesian Resources' long position.
The idea behind United Utilities Group and Artesian Resources 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 Stocks Directory module to find actively traded stocks across global markets.

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