Correlation Between American Water and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both American Water and Guangdong Investment 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 Guangdong Investment 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 Guangdong Investment, you can compare the effects of market volatilities on American Water and Guangdong Investment 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 Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Water and Guangdong Investment.
Diversification Opportunities for American Water and Guangdong Investment
-0.52 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between American and Guangdong is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding American Water Works and Guangdong Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of American Water i.e., American Water and Guangdong Investment go up and down completely randomly.
Pair Corralation between American Water and Guangdong Investment
Considering the 90-day investment horizon American Water Works is expected to generate 0.25 times more return on investment than Guangdong Investment. However, American Water Works is 3.98 times less risky than Guangdong Investment. It trades about -0.01 of its potential returns per unit of risk. Guangdong Investment is currently generating about -0.04 per unit of risk. If you would invest 13,801 in American Water Works on August 27, 2024 and sell it today you would lose (70.00) from holding American Water Works or give up 0.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Water Works vs. Guangdong Investment
Performance |
| Timeline |
| American Water Works |
| Guangdong Investment |
American Water and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Water and Guangdong Investment
The main advantage of trading using opposite American Water and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Water position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.| American Water vs. Cadiz Inc | American Water vs. Artesian Resources | American Water vs. Global Water Resources | American Water vs. Parke Bancorp |
| Guangdong Investment vs. Artesian Resources | Guangdong Investment vs. Global Water Resources | Guangdong Investment vs. Essential Utilities | Guangdong Investment vs. American Water Works |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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