Correlation Between Cadiz and Consolidated Water
Can any of the company-specific risk be diversified away by investing in both Cadiz and Consolidated Water 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 Cadiz and Consolidated Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cadiz Inc and Consolidated Water Co, you can compare the effects of market volatilities on Cadiz and Consolidated Water 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 Cadiz with a short position of Consolidated Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadiz and Consolidated Water.
Diversification Opportunities for Cadiz and Consolidated Water
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cadiz and Consolidated is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Cadiz Inc and Consolidated Water Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Water and Cadiz 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 Cadiz Inc are associated (or correlated) with Consolidated Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Water has no effect on the direction of Cadiz i.e., Cadiz and Consolidated Water go up and down completely randomly.
Pair Corralation between Cadiz and Consolidated Water
Given the investment horizon of 90 days Cadiz Inc is expected to generate 1.41 times more return on investment than Consolidated Water. However, Cadiz is 1.41 times more volatile than Consolidated Water Co. It trades about -0.15 of its potential returns per unit of risk. Consolidated Water Co is currently generating about -0.3 per unit of risk. If you would invest 259.00 in Cadiz Inc on January 20, 2024 and sell it today you would lose (34.00) from holding Cadiz Inc or give up 13.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cadiz Inc vs. Consolidated Water Co
Performance |
| Timeline |
| Cadiz Inc |
| Consolidated Water |
Cadiz and Consolidated Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadiz and Consolidated Water
The main advantage of trading using opposite Cadiz and Consolidated Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadiz position performs unexpectedly, Consolidated Water 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 Consolidated Water will offset losses from the drop in Consolidated Water's long position.| Cadiz vs. Middlesex Water | Cadiz vs. SJW Corporation | Cadiz vs. California Water Service | Cadiz vs. The York Water |
| Consolidated Water vs. SJW Corporation | Consolidated Water vs. Middlesex Water | Consolidated Water vs. California Water Service | Consolidated Water 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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