Correlation Between Atlantica Sustainable and California Water

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

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

Diversification Opportunities for Atlantica Sustainable and California Water

-0.78

Correlation Coefficient

Atlantica Sustainable  California Water

Pay attention - limited upside

The 3 months correlation between Atlantica and California is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Atlantica Sustainable Infrastr and California Water Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Water Service and Atlantica Sustainable 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 Atlantica Sustainable Infrastructure are associated (or correlated) with California Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Water Service has no effect on the direction of Atlantica Sustainable i.e., Atlantica Sustainable and California Water go up and down completely randomly.

Pair Corralation between Atlantica Sustainable and California Water

Allowing for the 90-day total investment horizon Atlantica Sustainable Infrastructure is expected to generate 0.09 times more return on investment than California Water. However, Atlantica Sustainable Infrastructure is 10.89 times less risky than California Water. It trades about 0.2 of its potential returns per unit of risk. California Water Service is currently generating about -0.08 per unit of risk. If you would invest  2,162  in Atlantica Sustainable Infrastructure on September 1, 2024 and sell it today you would earn a total of  32.00  from holding Atlantica Sustainable Infrastructure or generate 1.48% return on investment over 90 days.

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

Atlantica Sustainable Infrastr  vs.  California Water Service

Atlantica Sustainable

Risk-Adjusted Performance

15 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantica Sustainable Infrastructure are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Atlantica Sustainable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

California Water Service

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days California Water Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, California Water is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Atlantica Sustainable and California Water

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

The idea behind Atlantica Sustainable Infrastructure and California Water Service 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.