Correlation Between California Water and Allete
Can any of the company-specific risk be diversified away by investing in both California Water and Allete 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 California Water and Allete into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Water Service and Allete Inc, you can compare the effects of market volatilities on California Water and Allete 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 California Water with a short position of Allete. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Water and Allete.
Diversification Opportunities for California Water and Allete
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between California and Allete is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding California Water Service and Allete Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allete Inc and California 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 California Water Service are associated (or correlated) with Allete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allete Inc has no effect on the direction of California Water i.e., California Water and Allete go up and down completely randomly.
Pair Corralation between California Water and Allete
Considering the 90-day investment horizon California Water Service is expected to under-perform the Allete. In addition to that, California Water is 4.68 times more volatile than Allete Inc. It trades about -0.13 of its total potential returns per unit of risk. Allete Inc is currently generating about 0.15 per unit of volatility. If you would invest 6,267 in Allete Inc on November 2, 2024 and sell it today you would earn a total of 301.00 from holding Allete Inc or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Water Service vs. Allete Inc
Performance |
| Timeline |
| California Water Service |
| Allete Inc |
California Water and Allete Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Water and Allete
The main advantage of trading using opposite California Water and Allete positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Water position performs unexpectedly, Allete 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 Allete will offset losses from the drop in Allete's long position.| California Water vs. SJW Group Common | California Water vs. Artesian Resources | California Water vs. The York Water | California Water vs. American States Water |
| Allete vs. Avista | Allete vs. Black Hills | Allete vs. Montauk Renewables | Allete vs. Companhia Paranaense de |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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