Correlation Between California Water and American States
Can any of the company-specific risk be diversified away by investing in both California Water and American States 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 California Water and American States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Water Service and American States Water, you can compare the effects of market volatilities on California Water and American States 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 California Water with a short position of American States. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Water and American States.
Diversification Opportunities for California Water and American States
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between California and American is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding California Water Service and American States Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American States Water and California 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 California Water Service are associated (or correlated) with American States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American States Water has no effect on the direction of California Water i.e., California Water and American States go up and down completely randomly.
Pair Corralation between California Water and American States
Considering the 90-day investment horizon California Water Service is expected to generate 1.12 times more return on investment than American States. However, California Water is 1.12 times more volatile than American States Water. It trades about 0.03 of its potential returns per unit of risk. American States Water is currently generating about 0.01 per unit of risk. If you would invest 4,696 in California Water Service on March 10, 2024 and sell it today you would earn a total of 63.00 from holding California Water Service or generate 1.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
California Water Service vs. American States Water
Performance |
Timeline |
California Water Service |
American States Water |
California Water and American States Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with California Water and American States
The main advantage of trading using opposite California Water and American States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Water position performs unexpectedly, American States 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 American States will offset losses from the drop in American States' long position.California Water vs. SJW Corporation | California Water vs. The York Water | California Water vs. American States Water | California Water vs. Global Water Resources |
American States vs. SJW Corporation | American States vs. The York Water | American States vs. Global Water Resources | American States vs. Essential Utilities |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
Other Complementary Tools
AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
Global Correlations Find global opportunities by holding instruments from different markets | |
Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |