Correlation Between SJW and York Water

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

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

Diversification Opportunities for SJW and York Water

0.74

Correlation Coefficient

SJW  York Water

Poor diversification

The 3 months correlation between SJW and York is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SJW Corp. and The York Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on York Water and SJW 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 Corporation are associated (or correlated) with York Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of York Water has no effect on the direction of SJW i.e., SJW and York Water go up and down completely randomly.

Pair Corralation between SJW and York Water

Considering the 90-day investment horizon SJW is expected to generate 2.59 times less return on investment than York Water. In addition to that, SJW is 1.08 times more volatile than The York Water. It trades about 0.0 of its total potential returns per unit of risk. The York Water is currently generating about 0.0 per unit of volatility. If you would invest  3,799  in The York Water on February 4, 2024 and sell it today you would lose (109.00) from holding The York Water or give up 2.87% of portfolio value over 90 days.

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

SJW Corp.  vs.  The York Water

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 newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

York Water

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The York Water are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, York Water is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with SJW and York Water

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

The idea behind SJW Corporation and The York Water 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.