Correlation Between American Water and Cadiz
Can any of the company-specific risk be diversified away by investing in both American Water and Cadiz 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 American Water and Cadiz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Water Works and Cadiz Inc, you can compare the effects of market volatilities on American Water and Cadiz 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 American Water with a short position of Cadiz. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Water and Cadiz.
Diversification Opportunities for American Water and Cadiz
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between American and Cadiz is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding American Water Works and Cadiz Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadiz Inc and American Water 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 American Water Works are associated (or correlated) with Cadiz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadiz Inc has no effect on the direction of American Water i.e., American Water and Cadiz go up and down completely randomly.
Pair Corralation between American Water and Cadiz
Considering the 90-day investment horizon American Water Works is expected to under-perform the Cadiz. But the stock apears to be less risky and, when comparing its historical volatility, American Water Works is 3.37 times less risky than Cadiz. The stock trades about -0.03 of its potential returns per unit of risk. The Cadiz Inc is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 311.00 in Cadiz Inc on August 28, 2024 and sell it today you would earn a total of 38.00 from holding Cadiz Inc or generate 12.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Water Works vs. Cadiz Inc
Performance |
| Timeline |
| American Water Works |
| Cadiz Inc |
American Water and Cadiz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Water and Cadiz
The main advantage of trading using opposite American Water and Cadiz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Water position performs unexpectedly, Cadiz 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 Cadiz will offset losses from the drop in Cadiz's long position.| American Water vs. Cadiz Inc | American Water vs. Artesian Resources | American Water vs. Global Water Resources | American Water vs. Parke Bancorp |
| Cadiz vs. Middlesex Water | Cadiz vs. SJW Group Common | Cadiz vs. California Water Service | Cadiz vs. The York Water |
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.
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