Correlation Between California Water and EDP Energias
Can any of the company-specific risk be diversified away by investing in both California Water and EDP Energias 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 EDP Energias 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 EDP Energias de, you can compare the effects of market volatilities on California Water and EDP Energias 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 EDP Energias. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Water and EDP Energias.
Diversification Opportunities for California Water and EDP Energias
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between California and EDP is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding California Water Service and EDP Energias de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias de 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 EDP Energias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias de has no effect on the direction of California Water i.e., California Water and EDP Energias go up and down completely randomly.
Pair Corralation between California Water and EDP Energias
Considering the 90-day investment horizon California Water Service is expected to generate 0.78 times more return on investment than EDP Energias. However, California Water Service is 1.28 times less risky than EDP Energias. It trades about 0.03 of its potential returns per unit of risk. EDP Energias de is currently generating about -0.06 per unit of risk. If you would invest 4,902 in California Water Service on September 1, 2024 and sell it today you would earn a total of 217.00 from holding California Water Service or generate 4.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
California Water Service vs. EDP Energias de
Performance |
| Timeline |
| California Water Service |
| EDP Energias de |
California Water and EDP Energias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Water and EDP Energias
The main advantage of trading using opposite California Water and EDP Energias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Water position performs unexpectedly, EDP Energias 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 EDP Energias will offset losses from the drop in EDP Energias' 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 |
| EDP Energias vs. RWE AG PK | EDP Energias vs. Iberdrola SA | EDP Energias vs. ENEL Societa per | EDP Energias vs. SSE PLC ADR |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Equity Search Search for actively traded equities including funds and ETFs from over 30 global markets |