Correlation Between American Water and SJW Group
Can any of the company-specific risk be diversified away by investing in both American Water and SJW Group 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 SJW Group 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 SJW Group Common, you can compare the effects of market volatilities on American Water and SJW Group 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 SJW Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Water and SJW Group.
Diversification Opportunities for American Water and SJW Group
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between American and SJW is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding American Water Works and SJW Group Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SJW Group Common 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 SJW Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SJW Group Common has no effect on the direction of American Water i.e., American Water and SJW Group go up and down completely randomly.
Pair Corralation between American Water and SJW Group
Considering the 90-day investment horizon American Water Works is expected to generate 0.87 times more return on investment than SJW Group. However, American Water Works is 1.15 times less risky than SJW Group. It trades about 0.02 of its potential returns per unit of risk. SJW Group Common is currently generating about -0.02 per unit of risk. If you would invest 12,018 in American Water Works on November 5, 2024 and sell it today you would earn a total of 446.00 from holding American Water Works or generate 3.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Water Works vs. SJW Group Common
Performance |
| Timeline |
| American Water Works |
| SJW Group Common |
American Water and SJW Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Water and SJW Group
The main advantage of trading using opposite American Water and SJW Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Water position performs unexpectedly, SJW Group 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 SJW Group will offset losses from the drop in SJW Group'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 |
| SJW Group vs. California Water Service | SJW Group vs. Artesian Resources | SJW Group vs. The York Water | SJW Group vs. American States 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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