Correlation Between Cheniere Energy and Southwest Gas
Can any of the company-specific risk be diversified away by investing in both Cheniere Energy and Southwest Gas 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 Cheniere Energy and Southwest Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheniere Energy Partners and Southwest Gas Holdings, you can compare the effects of market volatilities on Cheniere Energy and Southwest Gas 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 Cheniere Energy with a short position of Southwest Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheniere Energy and Southwest Gas.
Diversification Opportunities for Cheniere Energy and Southwest Gas
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cheniere and Southwest is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy Partners and Southwest Gas Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Gas Holdings and Cheniere 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 Cheniere Energy Partners are associated (or correlated) with Southwest Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Gas Holdings has no effect on the direction of Cheniere Energy i.e., Cheniere Energy and Southwest Gas go up and down completely randomly.
Pair Corralation between Cheniere Energy and Southwest Gas
Considering the 90-day investment horizon Cheniere Energy Partners is expected to generate 0.97 times more return on investment than Southwest Gas. However, Cheniere Energy Partners is 1.03 times less risky than Southwest Gas. It trades about 0.1 of its potential returns per unit of risk. Southwest Gas Holdings is currently generating about 0.03 per unit of risk. If you would invest 4,838 in Cheniere Energy Partners on September 3, 2024 and sell it today you would earn a total of 987.00 from holding Cheniere Energy Partners or generate 20.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheniere Energy Partners vs. Southwest Gas Holdings
Performance |
| Timeline |
| Cheniere Energy Partners |
| Southwest Gas Holdings |
Cheniere Energy and Southwest Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheniere Energy and Southwest Gas
The main advantage of trading using opposite Cheniere Energy and Southwest Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheniere Energy position performs unexpectedly, Southwest Gas 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 Southwest Gas will offset losses from the drop in Southwest Gas' long position.| Cheniere Energy vs. Plains All American | Cheniere Energy vs. Genesis Energy LP | Cheniere Energy vs. Western Midstream Partners | Cheniere Energy vs. Hess Midstream Partners |
| Southwest Gas vs. NewJersey Resources | Southwest Gas vs. Northwest Natural Gas | Southwest Gas vs. NorthWestern | Southwest Gas vs. Chesapeake Utilities |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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