Correlation Between California Water and Cadiz Depositary
Can any of the company-specific risk be diversified away by investing in both California Water and Cadiz Depositary 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 Cadiz Depositary 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 Cadiz Depositary Shares, you can compare the effects of market volatilities on California Water and Cadiz Depositary 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 Cadiz Depositary. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Water and Cadiz Depositary.
Diversification Opportunities for California Water and Cadiz Depositary
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between California and Cadiz is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding California Water Service and Cadiz Depositary Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadiz Depositary Shares 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 Cadiz Depositary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadiz Depositary Shares has no effect on the direction of California Water i.e., California Water and Cadiz Depositary go up and down completely randomly.
Pair Corralation between California Water and Cadiz Depositary
Considering the 90-day investment horizon California Water Service is expected to under-perform the Cadiz Depositary. But the stock apears to be less risky and, when comparing its historical volatility, California Water Service is 1.6 times less risky than Cadiz Depositary. The stock trades about -0.01 of its potential returns per unit of risk. The Cadiz Depositary Shares is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,026 in Cadiz Depositary Shares on December 4, 2024 and sell it today you would earn a total of 822.00 from holding Cadiz Depositary Shares or generate 80.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Water Service vs. Cadiz Depositary Shares
Performance |
| Timeline |
| California Water Service |
| Cadiz Depositary Shares |
California Water and Cadiz Depositary Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Water and Cadiz Depositary
The main advantage of trading using opposite California Water and Cadiz Depositary positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Water position performs unexpectedly, Cadiz Depositary 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 Cadiz Depositary will offset losses from the drop in Cadiz Depositary's long position.| California Water vs. SJW Group Common | ||
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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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