Correlation Between Global Water and SJW Group

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

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

Diversification Opportunities for Global Water and SJW Group

-0.33

Correlation Coefficient

Global Water  SJW Group

Very good diversification

The 3 months correlation between Global and SJW is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Global Water Resources and SJW Group Common in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SJW Group Common and Global 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 Global Water Resources are associated (or correlated) with SJW Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SJW Group Common has no effect on the direction of Global Water i.e., Global Water and SJW Group go up and down completely randomly.

Pair Corralation between Global Water and SJW Group

Given the investment horizon of 90 days Global Water Resources is expected to under-perform the SJW Group. But the stock apears to be less risky and, when comparing its historical volatility, Global Water Resources is 1.2 times less risky than SJW Group. The stock trades about -0.11 of its potential returns per unit of risk. The SJW Group Common is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,897  in SJW Group Common on December 27, 2024 and sell it today you would earn a total of  297.00  from holding SJW Group Common or generate 6.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Global Water Resources  vs.  SJW Group Common

Global Water Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Water Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

SJW Group Common

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SJW Group Common are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward-looking indicators, SJW Group may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Global Water and SJW Group

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

The idea behind Global Water Resources and SJW Group Common 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.