Correlation Between American Water and CenterPoint Energy
Can any of the company-specific risk be diversified away by investing in both American Water and CenterPoint Energy 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 American Water and CenterPoint Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Water Works and CenterPoint Energy, you can compare the effects of market volatilities on American Water and CenterPoint Energy 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 American Water with a short position of CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Water and CenterPoint Energy.
Diversification Opportunities for American Water and CenterPoint Energy
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between American and CenterPoint is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding American Water Works and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy and American 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 American Water Works are associated (or correlated) with CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of American Water i.e., American Water and CenterPoint Energy go up and down completely randomly.
Pair Corralation between American Water and CenterPoint Energy
Considering the 90-day investment horizon American Water Works is expected to under-perform the CenterPoint Energy. In addition to that, American Water is 2.1 times more volatile than CenterPoint Energy. It trades about -0.19 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about -0.01 per unit of volatility. If you would invest 3,986 in CenterPoint Energy on August 16, 2025 and sell it today you would lose (12.00) from holding CenterPoint Energy or give up 0.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American Water Works vs. CenterPoint Energy
Performance |
| Timeline |
| American Water Works |
| CenterPoint Energy |
American Water and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Water and CenterPoint Energy
The main advantage of trading using opposite American Water and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Water position performs unexpectedly, CenterPoint Energy 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy's long position.| American Water vs. Fortis Inc | American Water vs. Centrais Eltricas Brasileiras | American Water vs. Southern Company | American Water vs. Centrais Electricas Brasileiras |
| CenterPoint Energy vs. Southern Company | CenterPoint Energy vs. Centrais Eltricas Brasileiras | CenterPoint Energy vs. Fortis Inc | CenterPoint Energy vs. American Water Works |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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