Correlation Between California Water and NorthWestern
Can any of the company-specific risk be diversified away by investing in both California Water and NorthWestern 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 NorthWestern 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 NorthWestern, you can compare the effects of market volatilities on California Water and NorthWestern 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 NorthWestern. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Water and NorthWestern.
Diversification Opportunities for California Water and NorthWestern
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between California and NorthWestern is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding California Water Service and NorthWestern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWestern 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 NorthWestern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthWestern has no effect on the direction of California Water i.e., California Water and NorthWestern go up and down completely randomly.
Pair Corralation between California Water and NorthWestern
Considering the 90-day investment horizon California Water Service is expected to generate 1.47 times more return on investment than NorthWestern. However, California Water is 1.47 times more volatile than NorthWestern. It trades about 0.05 of its potential returns per unit of risk. NorthWestern is currently generating about 0.06 per unit of risk. If you would invest 4,606 in California Water Service on March 15, 2024 and sell it today you would earn a total of 171.00 from holding California Water Service or generate 3.71% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
California Water Service vs. NorthWestern
Performance |
Timeline |
California Water Service |
NorthWestern |
California Water and NorthWestern Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with California Water and NorthWestern
The main advantage of trading using opposite California Water and NorthWestern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Water position performs unexpectedly, NorthWestern 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 NorthWestern will offset losses from the drop in NorthWestern's long position.California Water vs. SJW Corporation | California Water vs. Artesian Resources | California Water vs. The York Water | California Water vs. American States Water |
NorthWestern vs. Southern Company | NorthWestern vs. American Electric Power | NorthWestern vs. Nextera Energy | NorthWestern vs. Duke Energy |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
Other Complementary Tools
Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites |