Correlation Between Global Water and Cadiz
Can any of the company-specific risk be diversified away by investing in both Global Water and Cadiz 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 Global Water and Cadiz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Water Resources and Cadiz Inc, you can compare the effects of market volatilities on Global Water and Cadiz 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 Global Water with a short position of Cadiz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Water and Cadiz.
Diversification Opportunities for Global Water and Cadiz
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Global and Cadiz is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Global Water Resources and Cadiz Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadiz Inc and Global 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 Global Water Resources are associated (or correlated) with Cadiz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadiz Inc has no effect on the direction of Global Water i.e., Global Water and Cadiz go up and down completely randomly.
Pair Corralation between Global Water and Cadiz
Given the investment horizon of 90 days Global Water is expected to generate 1.21 times less return on investment than Cadiz. But when comparing it to its historical volatility, Global Water Resources is 3.06 times less risky than Cadiz. It trades about 0.01 of its potential returns per unit of risk. Cadiz Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 507.00 in Cadiz Inc on November 3, 2024 and sell it today you would lose (13.00) from holding Cadiz Inc or give up 2.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Water Resources vs. Cadiz Inc
Performance |
| Timeline |
| Global Water Resources |
| Cadiz Inc |
Global Water and Cadiz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Water and Cadiz
The main advantage of trading using opposite Global Water and Cadiz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Water position performs unexpectedly, Cadiz 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 will offset losses from the drop in Cadiz's long position.| Global Water vs. Middlesex Water | Global Water vs. California Water Service | Global Water vs. American States Water | Global Water vs. Artesian Resources |
| Cadiz vs. Middlesex Water | Cadiz vs. SJW Group Common | Cadiz vs. California Water Service | Cadiz vs. The York 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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