Correlation Between Dupont De and California Water

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

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

Diversification Opportunities for Dupont De and California Water

0.25

Correlation Coefficient

Dupont De  California Water

Modest diversification

The 3 months correlation between Dupont and California is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and California Water go up and down completely randomly.

Pair Corralation between Dupont De and California Water

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to under-perform the California Water. In addition to that, Dupont De is 1.0 times more volatile than California Water Service. It trades about -0.01 of its total potential returns per unit of risk. California Water Service is currently generating about 0.03 per unit of volatility. If you would invest  4,535  in California Water Service on December 29, 2024 and sell it today you would earn a total of  116.00  from holding California Water Service or generate 2.56% return on investment over 90 days.

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

Dupont De Nemours  vs.  California Water Service

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

California Water Service

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in California Water Service are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Dupont De and California Water

The main advantage of trading using opposite Dupont De and California Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.