Correlation Between Essential Utilities and Utilities Fund

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

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

Diversification Opportunities for Essential Utilities and Utilities Fund

-0.59

Correlation Coefficient

Essential Utilities  Utilities Fund

Excellent diversification

The 3 months correlation between Essential and Utilities is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Essential Utilities and Utilities Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Fund Class and Essential 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 Essential Utilities are associated (or correlated) with Utilities Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Fund Class has no effect on the direction of Essential Utilities i.e., Essential Utilities and Utilities Fund go up and down completely randomly.

Pair Corralation between Essential Utilities and Utilities Fund

Given the investment horizon of 90 days Essential Utilities is expected to under-perform the Utilities Fund. In addition to that, Essential Utilities is 1.66 times more volatile than Utilities Fund Class. It trades about -0.07 of its total potential returns per unit of risk. Utilities Fund Class is currently generating about 0.18 per unit of volatility. If you would invest  5,157  in Utilities Fund Class on May 4, 2025 and sell it today you would earn a total of  471.00  from holding Utilities Fund Class or generate 9.13% return on investment over 90 days.

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

Essential Utilities  vs.  Utilities Fund Class

Essential Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Essential Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Essential Utilities is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Utilities Fund Class

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Fund Class are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Utilities Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Essential Utilities and Utilities Fund

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

The idea behind Essential Utilities and Utilities Fund Class 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.