Correlation Between American Water and Consolidated Water
Can any of the company-specific risk be diversified away by investing in both American Water and Consolidated Water 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 Consolidated Water 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 Consolidated Water Co, you can compare the effects of market volatilities on American Water and Consolidated Water 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 Consolidated Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Water and Consolidated Water.
Diversification Opportunities for American Water and Consolidated Water
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between American and Consolidated is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding American Water Works and Consolidated Water Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Water 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 Consolidated Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Water has no effect on the direction of American Water i.e., American Water and Consolidated Water go up and down completely randomly.
Pair Corralation between American Water and Consolidated Water
Considering the 90-day investment horizon American Water Works is expected to under-perform the Consolidated Water. But the stock apears to be less risky and, when comparing its historical volatility, American Water Works is 1.69 times less risky than Consolidated Water. The stock trades about 0.0 of its potential returns per unit of risk. The Consolidated Water Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,465 in Consolidated Water Co on August 29, 2024 and sell it today you would earn a total of 196.00 from holding Consolidated Water Co or generate 7.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Water Works vs. Consolidated Water Co
Performance |
| Timeline |
| American Water Works |
| Consolidated Water |
American Water and Consolidated Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Water and Consolidated Water
The main advantage of trading using opposite American Water and Consolidated Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Water position performs unexpectedly, Consolidated Water 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 Consolidated Water will offset losses from the drop in Consolidated Water's long position.| American Water vs. California Water Service | American Water vs. Middlesex Water | American Water vs. American States Water | American Water vs. The York Water |
| Consolidated Water vs. SJW Group Common | Consolidated Water vs. Middlesex Water | Consolidated Water vs. California Water Service | Consolidated Water 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity |