Correlation Between American States and TTW Public

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

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

Diversification Opportunities for American States and TTW Public

-0.55

Correlation Coefficient

American States  TTW Public

Excellent diversification

The 3 months correlation between American and TTW is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding American States Water and TTW Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TTW Public and American States 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 American States Water are associated (or correlated) with TTW Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TTW Public has no effect on the direction of American States i.e., American States and TTW Public go up and down completely randomly.

Pair Corralation between American States and TTW Public

Assuming the 90 days horizon American States Water is expected to generate 0.61 times more return on investment than TTW Public. However, American States Water is 1.63 times less risky than TTW Public. It trades about 0.02 of its potential returns per unit of risk. TTW Public is currently generating about 0.01 per unit of risk. If you would invest  7,466  in American States Water on September 22, 2024 and sell it today you would earn a total of  79.00  from holding American States Water or generate 1.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.48%
Values	Daily Returns

American States Water  vs.  TTW Public

American States Water

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American States Water are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, American States is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TTW Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TTW Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TTW Public is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with American States and TTW Public

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

The idea behind American States Water and TTW Public 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.