Correlation Between SJW Group and Consolidated Water

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

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

Diversification Opportunities for SJW Group and Consolidated Water

0.42

Correlation Coefficient

SJW Group  Consolidated Water

Very weak diversification

The 3 months correlation between SJW and Consolidated is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding SJW Group Common and Consolidated Water Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Water and SJW Group 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 SJW Group Common are associated (or correlated) with Consolidated Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Water has no effect on the direction of SJW Group i.e., SJW Group and Consolidated Water go up and down completely randomly.

Pair Corralation between SJW Group and Consolidated Water

Considering the 90-day investment horizon SJW Group Common is expected to generate 0.87 times more return on investment than Consolidated Water. However, SJW Group Common is 1.15 times less risky than Consolidated Water. It trades about 0.09 of its potential returns per unit of risk. Consolidated Water Co is currently generating about -0.03 per unit of risk. If you would invest  4,914  in SJW Group Common on December 29, 2024 and sell it today you would earn a total of  446.00  from holding SJW Group Common or generate 9.08% return on investment over 90 days.

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

SJW Group Common  vs.  Consolidated Water Co

SJW Group Common

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SJW Group Common are ranked lower than 6 (%) 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.

Consolidated Water

Risk-Adjusted Performance

Very Weak

Over the last 90 days Consolidated Water Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Consolidated Water is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with SJW Group and Consolidated Water

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

The idea behind SJW Group Common and Consolidated Water Co 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.