Correlation Between UNITIL and National Grid
Can any of the company-specific risk be diversified away by investing in both UNITIL and National Grid 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 National Grid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UNITIL and National Grid PLC, you can compare the effects of market volatilities on UNITIL and National Grid 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 National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITIL and National Grid.
Diversification Opportunities for UNITIL and National Grid
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between UNITIL and National is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding UNITIL and National Grid PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid PLC 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 National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid PLC has no effect on the direction of UNITIL i.e., UNITIL and National Grid go up and down completely randomly.
Pair Corralation between UNITIL and National Grid
Considering the 90-day investment horizon UNITIL is expected to generate 1.1 times more return on investment than National Grid. However, UNITIL is 1.1 times more volatile than National Grid PLC. It trades about -0.09 of its potential returns per unit of risk. National Grid PLC is currently generating about -0.18 per unit of risk. If you would invest 5,151 in UNITIL on January 20, 2024 and sell it today you would lose (132.00) from holding UNITIL or give up 2.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
UNITIL vs. National Grid PLC
Performance |
| Timeline |
| UNITIL |
| National Grid PLC |
UNITIL and National Grid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNITIL and National Grid
The main advantage of trading using opposite UNITIL and National Grid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITIL position performs unexpectedly, National Grid 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 National Grid will offset losses from the drop in National Grid's long position.The idea behind UNITIL and National Grid PLC 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.| National Grid vs. American Electric Power | National Grid vs. Nextera Energy | National Grid vs. Aquagold International | National Grid vs. Morningstar Unconstrained Allocation |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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