Correlation Between Consolidated Water and Proshares

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

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

Diversification Opportunities for Consolidated Water and Proshares

0.36

Correlation Coefficient

Consolidated Water  Proshares

Weak diversification

The 3 months correlation between Consolidated and Proshares is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Water Co and Proshares SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Proshares SP Global and Consolidated 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 Consolidated Water Co are associated (or correlated) with Proshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Proshares SP Global has no effect on the direction of Consolidated Water i.e., Consolidated Water and Proshares go up and down completely randomly.

Pair Corralation between Consolidated Water and Proshares

Given the investment horizon of 90 days Consolidated Water Co is expected to under-perform the Proshares. In addition to that, Consolidated Water is 1.66 times more volatile than Proshares SP Global. It trades about -0.03 of its total potential returns per unit of risk. Proshares SP Global is currently generating about 0.02 per unit of volatility. If you would invest  2,560  in Proshares SP Global on December 30, 2024 and sell it today you would earn a total of  38.00  from holding Proshares SP Global or generate 1.48% return on investment over 90 days.

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

Consolidated Water Co  vs.  Proshares SP Global

Consolidated Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Consolidated Water Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Consolidated Water is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Proshares SP Global

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Proshares SP Global are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Proshares is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Consolidated Water and Proshares

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

The idea behind Consolidated Water Co and Proshares SP Global 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.