Correlation Between Middlesex Water and Cadiz
Can any of the company-specific risk be diversified away by investing in both Middlesex 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 Middlesex Water and Cadiz into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Middlesex Water and Cadiz Inc, you can compare the effects of market volatilities on Middlesex 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 Middlesex Water with a short position of Cadiz. Check out your portfolio center. Please also check ongoing floating volatility patterns of Middlesex Water and Cadiz.
Diversification Opportunities for Middlesex Water and Cadiz
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Middlesex and Cadiz is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Middlesex Water and Cadiz Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadiz Inc 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 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 Middlesex Water i.e., Middlesex Water and Cadiz go up and down completely randomly.
Pair Corralation between Middlesex Water and Cadiz
Given the investment horizon of 90 days Middlesex Water is expected to generate 0.53 times more return on investment than Cadiz. However, Middlesex Water is 1.88 times less risky than Cadiz. It trades about 0.11 of its potential returns per unit of risk. Cadiz Inc is currently generating about 0.02 per unit of risk. If you would invest 5,061 in Middlesex Water on August 24, 2024 and sell it today you would earn a total of 1,524 from holding Middlesex Water or generate 30.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Middlesex Water vs. Cadiz Inc
Performance |
| Timeline |
| Middlesex Water |
| Cadiz Inc |
Middlesex Water and Cadiz Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Middlesex Water and Cadiz
The main advantage of trading using opposite Middlesex Water and Cadiz positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Middlesex 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.| Middlesex Water vs. SJW Group Common | Middlesex Water vs. American States Water | Middlesex Water vs. The York Water | Middlesex 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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