Correlation Between Artesian Resources and American Water

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

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

Diversification Opportunities for Artesian Resources and American Water

0.71

Correlation Coefficient

Artesian Resources  American Water

Poor diversification

The 3 months correlation between Artesian and American is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Artesian Resources and American Water Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Water Works and Artesian Resources 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 Artesian Resources are associated (or correlated) with American Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Water Works has no effect on the direction of Artesian Resources i.e., Artesian Resources and American Water go up and down completely randomly.

Pair Corralation between Artesian Resources and American Water

Assuming the 90 days horizon Artesian Resources is expected to under-perform the American Water. But the stock apears to be less risky and, when comparing its historical volatility, Artesian Resources is 1.15 times less risky than American Water. The stock trades about -0.04 of its potential returns per unit of risk. The American Water Works is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  14,727  in American Water Works on May 4, 2025 and sell it today you would lose (155.00) from holding American Water Works or give up 1.05% of portfolio value over 90 days.

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

Artesian Resources  vs.  American Water Works

Artesian Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Artesian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Artesian Resources is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

American Water Works

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Water Works has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, American Water is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Artesian Resources and American Water

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

The idea behind Artesian Resources and American Water Works 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.