Correlation Between Artesian Resources and Essential Utilities

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

By analyzing existing cross correlation between Artesian Resources and Essential Utilities, you can compare the effects of market volatilities on Artesian Resources and Essential Utilities 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 Essential Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Artesian Resources and Essential Utilities.

Diversification Opportunities for Artesian Resources and Essential Utilities

-0.08

Correlation Coefficient

Artesian Resources  Essential Utilities

Good diversification

The 3 months correlation between Artesian and Essential is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Artesian Resources and Essential Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Utilities 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 Essential Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Utilities has no effect on the direction of Artesian Resources i.e., Artesian Resources and Essential Utilities go up and down completely randomly.

Pair Corralation between Artesian Resources and Essential Utilities

Assuming the 90 days horizon Artesian Resources is expected to under-perform the Essential Utilities. In addition to that, Artesian Resources is 1.43 times more volatile than Essential Utilities. It trades about -0.02 of its total potential returns per unit of risk. Essential Utilities is currently generating about 0.06 per unit of volatility. If you would invest  3,879  in Essential Utilities on August 31, 2024 and sell it today you would earn a total of  149.00  from holding Essential Utilities or generate 3.84% return on investment over 90 days.

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

Artesian Resources  vs.  Essential Utilities

Artesian Resources

Risk-Adjusted Performance

0 of 100

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Essential Utilities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Essential Utilities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Essential Utilities is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Artesian Resources and Essential Utilities

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

The idea behind Artesian Resources and Essential Utilities 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.