Correlation Between Consolidated Water and Mueller Water

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

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

Diversification Opportunities for Consolidated Water and Mueller Water

-0.46

Correlation Coefficient

Consolidated Water  Mueller Water

Very good diversification

The 3 months correlation between Consolidated and Mueller is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Water Co and Mueller Water Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mueller Water Products and Consolidated 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 Consolidated Water Co are associated (or correlated) with Mueller Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mueller Water Products has no effect on the direction of Consolidated Water i.e., Consolidated Water and Mueller Water go up and down completely randomly.

Pair Corralation between Consolidated Water and Mueller Water

Given the investment horizon of 90 days Consolidated Water Co is expected to generate 0.96 times more return on investment than Mueller Water. However, Consolidated Water Co is 1.05 times less risky than Mueller Water. It trades about 0.2 of its potential returns per unit of risk. Mueller Water Products is currently generating about -0.03 per unit of risk. If you would invest  2,315  in Consolidated Water Co on May 6, 2025 and sell it today you would earn a total of  528.00  from holding Consolidated Water Co or generate 22.81% return on investment over 90 days.

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

Consolidated Water Co  vs.  Mueller Water Products

Consolidated Water

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Water Co are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain fundamental indicators, Consolidated Water displayed solid returns over the last few months and may actually be approaching a breakup point.

Mueller Water Products

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Consolidated Water and Mueller Water

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

The idea behind Consolidated Water Co and Mueller Water Products 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.