Correlation Between Middlesex Water and SJW Group

Can any of the company-specific risk be diversified away by investing in both Middlesex 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 Middlesex 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 Middlesex Water and SJW Group Common, you can compare the effects of market volatilities on Middlesex 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 Middlesex Water with a short position of SJW Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Middlesex Water and SJW Group.

Diversification Opportunities for Middlesex Water and SJW Group

0.72

Correlation Coefficient

Middlesex Water  SJW Group

Poor diversification

The 3 months correlation between Middlesex and SJW is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Middlesex Water 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 Middlesex 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 Middlesex Water 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 Middlesex Water i.e., Middlesex Water and SJW Group go up and down completely randomly.

Pair Corralation between Middlesex Water and SJW Group

Given the investment horizon of 90 days Middlesex Water is expected to under-perform the SJW Group. But the stock apears to be less risky and, when comparing its historical volatility, Middlesex Water is 1.05 times less risky than SJW Group. The stock trades about -0.19 of its potential returns per unit of risk. The SJW Group Common is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  5,482  in SJW Group Common on November 27, 2024 and sell it today you would lose (57.00) from holding SJW Group Common or give up 1.04% of portfolio value over 90 days.

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

Middlesex Water  vs.  SJW Group Common

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.

SJW Group Common

Risk-Adjusted Performance

Very Weak

Over the last 90 days SJW Group Common has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward-looking indicators, SJW Group is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Middlesex Water and SJW Group

The main advantage of trading using opposite Middlesex Water and SJW Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Middlesex 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 Middlesex Water 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.

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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.