Correlation Between Consolidated Water and California Water
Can any of the company-specific risk be diversified away by investing in both Consolidated Water and California 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 Consolidated Water and California Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Water Co and California Water Service, you can compare the effects of market volatilities on Consolidated Water and California 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 Consolidated Water with a short position of California Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Water and California Water.
Diversification Opportunities for Consolidated Water and California Water
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Consolidated and California is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Water Co and California Water Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Water Service and Consolidated 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 Consolidated Water Co are associated (or correlated) with California Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Water Service has no effect on the direction of Consolidated Water i.e., Consolidated Water and California Water go up and down completely randomly.
Pair Corralation between Consolidated Water and California Water
Given the investment horizon of 90 days Consolidated Water Co is expected to generate 1.61 times more return on investment than California Water. However, Consolidated Water is 1.61 times more volatile than California Water Service. It trades about 0.19 of its potential returns per unit of risk. California Water Service is currently generating about 0.05 per unit of risk. If you would invest 2,465 in Consolidated Water Co on August 28, 2024 and sell it today you would earn a total of 220.00 from holding Consolidated Water Co or generate 8.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Water Co vs. California Water Service
Performance |
| Timeline |
| Consolidated Water |
| California Water Service |
Consolidated Water and California Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Water and California Water
The main advantage of trading using opposite Consolidated Water and California Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Water position performs unexpectedly, California 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 California Water will offset losses from the drop in California Water's long position.| Consolidated Water vs. SJW Group Common | Consolidated Water vs. Middlesex Water | Consolidated Water vs. California Water Service | Consolidated Water vs. The York Water |
| California Water vs. SJW Group Common | California Water vs. Artesian Resources | California Water vs. The York Water | California Water 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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