Correlation Between Middlesex Water and York Water

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

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

Diversification Opportunities for Middlesex Water and York Water

0.83

Correlation Coefficient

Middlesex Water  York Water

Very poor diversification

The 3 months correlation between Middlesex and York is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Middlesex Water and The York Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on York Water 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 York Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of York Water has no effect on the direction of Middlesex Water i.e., Middlesex Water and York Water go up and down completely randomly.

Pair Corralation between Middlesex Water and York Water

Given the investment horizon of 90 days Middlesex Water is expected to generate 1.74 times more return on investment than York Water. However, Middlesex Water is 1.74 times more volatile than The York Water. It trades about 0.11 of its potential returns per unit of risk. The York Water is currently generating about 0.07 per unit of risk. If you would invest  5,289  in Middlesex Water on December 29, 2024 and sell it today you would earn a total of  906.00  from holding Middlesex Water or generate 17.13% return on investment over 90 days.

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

Middlesex Water  vs.  The York Water

Middlesex Water

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Middlesex Water are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Middlesex Water showed solid returns over the last few months and may actually be approaching a breakup point.

York Water

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The York Water are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, York Water may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Middlesex Water and York Water

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

The idea behind Middlesex Water and The York Water 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 Commodity Directory module to find actively traded commodities issued by global exchanges.