Correlation Between Middlesex Water and Artesian Resources
Can any of the company-specific risk be diversified away by investing in both Middlesex Water and Artesian Resources 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 Middlesex Water and Artesian Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Middlesex Water and Artesian Resources, you can compare the effects of market volatilities on Middlesex Water and Artesian Resources 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 Middlesex Water with a short position of Artesian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Middlesex Water and Artesian Resources.
Diversification Opportunities for Middlesex Water and Artesian Resources
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Middlesex and Artesian is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Middlesex Water and Artesian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artesian Resources and Middlesex 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 Middlesex Water are associated (or correlated) with Artesian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artesian Resources has no effect on the direction of Middlesex Water i.e., Middlesex Water and Artesian Resources go up and down completely randomly.
Pair Corralation between Middlesex Water and Artesian Resources
Given the investment horizon of 90 days Middlesex Water is expected to under-perform the Artesian Resources. In addition to that, Middlesex Water is 1.21 times more volatile than Artesian Resources. It trades about -0.16 of its total potential returns per unit of risk. Artesian Resources is currently generating about -0.08 per unit of volatility. If you would invest 3,137 in Artesian Resources on October 24, 2024 and sell it today you would lose (59.00) from holding Artesian Resources or give up 1.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Middlesex Water vs. Artesian Resources
Performance |
| Timeline |
| Middlesex Water |
| Artesian Resources |
Middlesex Water and Artesian Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Middlesex Water and Artesian Resources
The main advantage of trading using opposite Middlesex Water and Artesian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Middlesex Water position performs unexpectedly, Artesian Resources 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 Artesian Resources will offset losses from the drop in Artesian Resources' long position.| Middlesex Water vs. SJW Group Common | Middlesex Water vs. American States Water | Middlesex Water vs. The York Water | Middlesex Water vs. Artesian Resources |
| Artesian Resources vs. California Water Service | Artesian Resources vs. SJW Group Common | Artesian Resources vs. The York Water | Artesian Resources 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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