Correlation Between SJW Group and Essential Utilities
Can any of the company-specific risk be diversified away by investing in both SJW Group and Essential Utilities 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 SJW Group and Essential Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SJW Group Common and Essential Utilities, you can compare the effects of market volatilities on SJW Group and Essential Utilities 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 SJW Group with a short position of Essential Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of SJW Group and Essential Utilities.
Diversification Opportunities for SJW Group and Essential Utilities
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between SJW and Essential is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding SJW Group Common and Essential Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Utilities and SJW Group 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 SJW Group Common are associated (or correlated) with Essential Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Utilities has no effect on the direction of SJW Group i.e., SJW Group and Essential Utilities go up and down completely randomly.
Pair Corralation between SJW Group and Essential Utilities
Considering the 90-day investment horizon SJW Group Common is expected to under-perform the Essential Utilities. In addition to that, SJW Group is 1.04 times more volatile than Essential Utilities. It trades about -0.12 of its total potential returns per unit of risk. Essential Utilities is currently generating about 0.11 per unit of volatility. If you would invest 3,884 in Essential Utilities on August 29, 2024 and sell it today you would earn a total of 120.00 from holding Essential Utilities or generate 3.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
SJW Group Common vs. Essential Utilities
Performance |
| Timeline |
| SJW Group Common |
| Essential Utilities |
SJW Group and Essential Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SJW Group and Essential Utilities
The main advantage of trading using opposite SJW Group and Essential Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SJW Group position performs unexpectedly, Essential Utilities 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 Essential Utilities will offset losses from the drop in Essential Utilities' long position.| SJW Group vs. California Water Service | SJW Group vs. Artesian Resources | SJW Group vs. The York Water | SJW Group vs. American States Water |
| Essential Utilities vs. American States Water | Essential Utilities vs. California Water Service | Essential Utilities vs. Consolidated Water Co | Essential Utilities vs. SJW Group Common |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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