Correlation Between California Water and Utilities Fund

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

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

Diversification Opportunities for California Water and Utilities Fund

-0.67

Correlation Coefficient

California Water  Utilities Fund

Excellent diversification

The 3 months correlation between California and Utilities is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding California Water Service and Utilities Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Fund Investor and California 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 California Water Service are associated (or correlated) with Utilities Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Fund Investor has no effect on the direction of California Water i.e., California Water and Utilities Fund go up and down completely randomly.

Pair Corralation between California Water and Utilities Fund

Considering the 90-day investment horizon California Water Service is expected to under-perform the Utilities Fund. In addition to that, California Water is 1.69 times more volatile than Utilities Fund Investor. It trades about -0.05 of its total potential returns per unit of risk. Utilities Fund Investor is currently generating about 0.17 per unit of volatility. If you would invest  1,841  in Utilities Fund Investor on May 4, 2025 and sell it today you would earn a total of  160.00  from holding Utilities Fund Investor or generate 8.69% return on investment over 90 days.

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

California Water Service  vs.  Utilities Fund Investor

California Water Service

Risk-Adjusted Performance

Very Weak

Over the last 90 days California Water Service has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, California Water is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Utilities Fund Investor

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Fund Investor are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Utilities Fund may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with California Water and Utilities Fund

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

The idea behind California Water Service and Utilities Fund Investor 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.