Correlation Between Atmos Energy and NorthWestern
Can any of the company-specific risk be diversified away by investing in both Atmos Energy and NorthWestern 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 Atmos Energy and NorthWestern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Atmos Energy and NorthWestern, you can compare the effects of market volatilities on Atmos Energy and NorthWestern 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 Atmos Energy with a short position of NorthWestern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atmos Energy and NorthWestern.
Diversification Opportunities for Atmos Energy and NorthWestern
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Atmos and NorthWestern is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Atmos Energy and NorthWestern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorthWestern and Atmos Energy 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 Atmos Energy are associated (or correlated) with NorthWestern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorthWestern has no effect on the direction of Atmos Energy i.e., Atmos Energy and NorthWestern go up and down completely randomly.
Pair Corralation between Atmos Energy and NorthWestern
Considering the 90-day investment horizon Atmos Energy is expected to generate 0.72 times more return on investment than NorthWestern. However, Atmos Energy is 1.38 times less risky than NorthWestern. It trades about 0.3 of its potential returns per unit of risk. NorthWestern is currently generating about 0.12 per unit of risk. If you would invest 14,149 in Atmos Energy on August 28, 2024 and sell it today you would earn a total of 869.00 from holding Atmos Energy or generate 6.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Atmos Energy vs. NorthWestern
Performance |
| Timeline |
| Atmos Energy |
| NorthWestern |
Atmos Energy and NorthWestern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Atmos Energy and NorthWestern
The main advantage of trading using opposite Atmos Energy and NorthWestern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atmos Energy position performs unexpectedly, NorthWestern 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 NorthWestern will offset losses from the drop in NorthWestern's long position.The idea behind Atmos Energy and NorthWestern 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.| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
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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