Correlation Between Cadiz and York Water

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

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

Diversification Opportunities for Cadiz and York Water

-0.75

Correlation Coefficient

Cadiz  York Water

Pay attention - limited upside

The 3 months correlation between Cadiz and York is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cadiz Inc and The York Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on York Water and Cadiz 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 Cadiz Inc 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 Cadiz i.e., Cadiz and York Water go up and down completely randomly.

Pair Corralation between Cadiz and York Water

Given the investment horizon of 90 days Cadiz Inc is expected to under-perform the York Water. In addition to that, Cadiz is 2.73 times more volatile than The York Water. It trades about -0.15 of its total potential returns per unit of risk. The York Water is currently generating about 0.04 per unit of volatility. If you would invest  3,269  in The York Water on December 28, 2024 and sell it today you would earn a total of  110.00  from holding The York Water or generate 3.36% return on investment over 90 days.

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

Cadiz Inc  vs.  The York Water

Cadiz Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cadiz Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

York Water

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The York Water are ranked lower than 3 (%) 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 Cadiz and York Water

The main advantage of trading using opposite Cadiz and York Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadiz 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 Cadiz Inc 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.