Correlation Between Cadiz Depositary and Middlesex Water

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

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

Diversification Opportunities for Cadiz Depositary and Middlesex Water

-0.85

Correlation Coefficient

Cadiz Depositary  Middlesex Water

Pay attention - limited upside

The 3 months correlation between Cadiz and Middlesex is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Cadiz Depositary Shares and Middlesex Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlesex Water and Cadiz Depositary 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 Depositary Shares 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 Cadiz Depositary i.e., Cadiz Depositary and Middlesex Water go up and down completely randomly.

Pair Corralation between Cadiz Depositary and Middlesex Water

Assuming the 90 days horizon Cadiz Depositary Shares is expected to generate 0.55 times more return on investment than Middlesex Water. However, Cadiz Depositary Shares is 1.82 times less risky than Middlesex Water. It trades about 0.18 of its potential returns per unit of risk. Middlesex Water is currently generating about -0.19 per unit of risk. If you would invest  1,638  in Cadiz Depositary Shares on November 27, 2024 and sell it today you would earn a total of  177.00  from holding Cadiz Depositary Shares or generate 10.81% return on investment over 90 days.

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

Cadiz Depositary Shares  vs.  Middlesex Water

Cadiz Depositary Shares

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cadiz Depositary Shares are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Cadiz Depositary may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Middlesex Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Middlesex Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Cadiz Depositary and Middlesex Water

The main advantage of trading using opposite Cadiz Depositary and Middlesex Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadiz Depositary 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 Cadiz Depositary Shares 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.