Correlation Between American Water and PUBLIC STORAGE

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

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

Diversification Opportunities for American Water and PUBLIC STORAGE

0.61

Correlation Coefficient

American Water  PUBLIC STORAGE

Poor diversification

The 3 months correlation between American and PUBLIC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding American Water Works and PUBLIC STORAGE PRFO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PUBLIC STORAGE PRFO and American 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 American Water Works are associated (or correlated) with PUBLIC STORAGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PUBLIC STORAGE PRFO has no effect on the direction of American Water i.e., American Water and PUBLIC STORAGE go up and down completely randomly.

Pair Corralation between American Water and PUBLIC STORAGE

Assuming the 90 days horizon American Water is expected to generate 22.8 times less return on investment than PUBLIC STORAGE. In addition to that, American Water is 1.44 times more volatile than PUBLIC STORAGE PRFO. It trades about 0.0 of its total potential returns per unit of risk. PUBLIC STORAGE PRFO is currently generating about 0.01 per unit of volatility. If you would invest  1,501  in PUBLIC STORAGE PRFO on October 4, 2024 and sell it today you would earn a total of  39.00  from holding PUBLIC STORAGE PRFO or generate 2.6% return on investment over 90 days.

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

American Water Works  vs.  PUBLIC STORAGE PRFO

American Water Works

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Water Works has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

PUBLIC STORAGE PRFO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PUBLIC STORAGE PRFO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with American Water and PUBLIC STORAGE

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

The idea behind American Water Works and PUBLIC STORAGE PRFO 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.