Correlation Between Contextlogic and California Water

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

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

Diversification Opportunities for Contextlogic and California Water

-0.7

Correlation Coefficient

Contextlogic  California Water

Excellent diversification

The 3 months correlation between Contextlogic and California is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Contextlogic and California Water Service in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California Water Service and Contextlogic 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 Contextlogic are associated (or correlated) with California Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California Water Service has no effect on the direction of Contextlogic i.e., Contextlogic and California Water go up and down completely randomly.

Pair Corralation between Contextlogic and California Water

Given the investment horizon of 90 days Contextlogic is expected to generate 2.94 times more return on investment than California Water. However, Contextlogic is 2.94 times more volatile than California Water Service. It trades about 0.02 of its potential returns per unit of risk. California Water Service is currently generating about -0.01 per unit of risk. If you would invest  806.00  in Contextlogic on February 11, 2025 and sell it today you would lose (54.00) from holding Contextlogic or give up 6.7% of portfolio value over 90 days.

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

Contextlogic  vs.  California Water Service

Contextlogic

Risk-Adjusted Performance

Very Weak

Over the last 90 days Contextlogic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Contextlogic is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

California Water Service

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in California Water Service are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, California Water is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Contextlogic and California Water

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

The idea behind Contextlogic and California Water Service 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.