Correlation Between American States and SJW

Can any of the company-specific risk be diversified away by investing in both American States and SJW 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 American States and SJW into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between American States Water and SJW Corporation, you can compare the effects of market volatilities on American States and SJW 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 American States with a short position of SJW. Check out your portfolio center. Please also check ongoing floating volatility patterns of American States and SJW.

Diversification Opportunities for American States and SJW

0.89

Correlation Coefficient

American States  SJW

Very poor diversification

The 3 months correlation between American and SJW is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding American States Water and SJW Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SJW Corporation and American States 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 American States Water are associated (or correlated) with SJW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SJW Corporation has no effect on the direction of American States i.e., American States and SJW go up and down completely randomly.

Pair Corralation between American States and SJW

Considering the 90-day investment horizon American States Water is expected to generate 1.01 times more return on investment than SJW. However, American States is 1.01 times more volatile than SJW Corporation. It trades about 0.03 of its potential returns per unit of risk. SJW Corporation is currently generating about 0.01 per unit of risk. If you would invest  7,573  in American States Water on February 21, 2024 and sell it today you would earn a total of  174.00  from holding American States Water or generate 2.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

American States Water  vs.  SJW Corp.

American States Water

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American States Water are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, American States is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

SJW Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SJW Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward-looking indicators, SJW is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with American States and SJW

The main advantage of trading using opposite American States and SJW positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American States position performs unexpectedly, SJW 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 will offset losses from the drop in SJW's long position.

The idea behind American States Water and SJW Corporation pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.