Correlation Between Utilities Select and Applied Industrial

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

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

Diversification Opportunities for Utilities Select and Applied Industrial

-0.76

Correlation Coefficient

Utilities Select  Applied Industrial

Pay attention - limited upside

The 3 months correlation between Utilities and Applied is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Select Sector and Applied Industrial Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Industrial and Utilities Select 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 Utilities Select Sector are associated (or correlated) with Applied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Industrial has no effect on the direction of Utilities Select i.e., Utilities Select and Applied Industrial go up and down completely randomly.

Pair Corralation between Utilities Select and Applied Industrial

Considering the 90-day investment horizon Utilities Select Sector is expected to generate 0.55 times more return on investment than Applied Industrial. However, Utilities Select Sector is 1.83 times less risky than Applied Industrial. It trades about 0.1 of its potential returns per unit of risk. Applied Industrial Technologies is currently generating about -0.05 per unit of risk. If you would invest  8,468  in Utilities Select Sector on August 18, 2025 and sell it today you would earn a total of  408.00  from holding Utilities Select Sector or generate 4.82% return on investment over 90 days.

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

Utilities Select Sector  vs.  Applied Industrial Technologie

Utilities Select Sector

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Select Sector are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Utilities Select is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Applied Industrial

Risk-Adjusted Performance

Weakest

Over the last 90 days Applied Industrial Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Applied Industrial is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Utilities Select and Applied Industrial

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

The idea behind Utilities Select Sector and Applied Industrial Technologies 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.