Correlation Between Cadiz and American States

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

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

Diversification Opportunities for Cadiz and American States

-0.4

Correlation Coefficient

Cadiz  American States

Very good diversification

The 3 months correlation between Cadiz and American is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Cadiz Depositary Shares and American States Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American States Water and Cadiz 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 Cadiz Depositary Shares are associated (or correlated) with American States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American States Water has no effect on the direction of Cadiz i.e., Cadiz and American States go up and down completely randomly.

Pair Corralation between Cadiz and American States

Assuming the 90 days horizon Cadiz Depositary Shares is expected to generate 0.95 times more return on investment than American States. However, Cadiz Depositary Shares is 1.06 times less risky than American States. It trades about 0.24 of its potential returns per unit of risk. American States Water is currently generating about 0.02 per unit of risk. If you would invest  1,689  in Cadiz Depositary Shares on July 20, 2025 and sell it today you would earn a total of  272.00  from holding Cadiz Depositary Shares or generate 16.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Cadiz Depositary Shares  vs.  American States Water

Cadiz Depositary Shares

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cadiz Depositary Shares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Cadiz reported solid returns over the last few months and may actually be approaching a breakup point.

American States Water

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in American States Water are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, American States is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Cadiz and American States

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

The idea behind Cadiz Depositary Shares and American States 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.