Correlation Between Artesian Resources and Middlesex Water

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

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

Diversification Opportunities for Artesian Resources and Middlesex Water

0.04

Correlation Coefficient

Artesian Resources  Middlesex Water

Significant diversification

The 3 months correlation between Artesian and Middlesex is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Artesian Resources and Middlesex Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlesex Water and Artesian Resources 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 Artesian Resources are associated (or correlated) with Middlesex Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middlesex Water has no effect on the direction of Artesian Resources i.e., Artesian Resources and Middlesex Water go up and down completely randomly.

Pair Corralation between Artesian Resources and Middlesex Water

Assuming the 90 days horizon Artesian Resources is expected to under-perform the Middlesex Water. But the stock apears to be less risky and, when comparing its historical volatility, Artesian Resources is 1.17 times less risky than Middlesex Water. The stock trades about -0.03 of its potential returns per unit of risk. The Middlesex Water is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6,269  in Middlesex Water on August 30, 2024 and sell it today you would earn a total of  263.00  from holding Middlesex Water or generate 4.2% return on investment over 90 days.

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

Artesian Resources  vs.  Middlesex Water

Artesian Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Artesian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Artesian Resources is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Middlesex Water

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Middlesex Water are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Middlesex Water is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Artesian Resources and Middlesex Water

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

The idea behind Artesian Resources and Middlesex 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.