Correlation Between Global Water and SJW Group
Can any of the company-specific risk be diversified away by investing in both Global Water and SJW Group 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 SJW Group 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 SJW Group Common, you can compare the effects of market volatilities on Global Water and SJW Group 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 SJW Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Water and SJW Group.
Diversification Opportunities for Global Water and SJW Group
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Global and SJW is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Global Water Resources and SJW Group Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SJW Group Common 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 SJW Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SJW Group Common has no effect on the direction of Global Water i.e., Global Water and SJW Group go up and down completely randomly.
Pair Corralation between Global Water and SJW Group
Given the investment horizon of 90 days Global Water is expected to generate 16.76 times less return on investment than SJW Group. But when comparing it to its historical volatility, Global Water Resources is 1.29 times less risky than SJW Group. It trades about 0.01 of its potential returns per unit of risk. SJW Group Common is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,870 in SJW Group Common on November 3, 2024 and sell it today you would earn a total of 153.00 from holding SJW Group Common or generate 3.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Water Resources vs. SJW Group Common
Performance |
| Timeline |
| Global Water Resources |
| SJW Group Common |
Global Water and SJW Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Water and SJW Group
The main advantage of trading using opposite Global Water and SJW Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Water position performs unexpectedly, SJW Group 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 SJW Group will offset losses from the drop in SJW Group'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 |
| SJW Group vs. California Water Service | SJW Group vs. Artesian Resources | SJW Group vs. The York Water | SJW Group 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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