Correlation Between Cadiz Depositary and Global Water
Can any of the company-specific risk be diversified away by investing in both Cadiz Depositary and Global 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 Cadiz Depositary and Global Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cadiz Depositary Shares and Global Water Resources, you can compare the effects of market volatilities on Cadiz Depositary and Global 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 Cadiz Depositary with a short position of Global Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadiz Depositary and Global Water.
Diversification Opportunities for Cadiz Depositary and Global Water
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cadiz and Global is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Cadiz Depositary Shares and Global Water Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Water Resources and Cadiz Depositary 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 Cadiz Depositary Shares are associated (or correlated) with Global Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Water Resources has no effect on the direction of Cadiz Depositary i.e., Cadiz Depositary and Global Water go up and down completely randomly.
Pair Corralation between Cadiz Depositary and Global Water
Assuming the 90 days horizon Cadiz Depositary Shares is expected to generate 0.68 times more return on investment than Global Water. However, Cadiz Depositary Shares is 1.47 times less risky than Global Water. It trades about 0.32 of its potential returns per unit of risk. Global Water Resources is currently generating about 0.08 per unit of risk. If you would invest 1,724 in Cadiz Depositary Shares on November 1, 2024 and sell it today you would earn a total of 121.00 from holding Cadiz Depositary Shares or generate 7.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.0% |
| Values | Daily Returns |
Cadiz Depositary Shares vs. Global Water Resources
Performance |
| Timeline |
| Cadiz Depositary Shares |
| Global Water Resources |
Cadiz Depositary and Global Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadiz Depositary and Global Water
The main advantage of trading using opposite Cadiz Depositary and Global Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadiz Depositary position performs unexpectedly, Global 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 Global Water will offset losses from the drop in Global Water's long position.The idea behind Cadiz Depositary Shares and Global Water Resources 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.| Global Water vs. Middlesex Water | Global Water vs. California Water Service | Global Water vs. American States Water | Global Water vs. Artesian Resources |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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