Correlation Between Eversource Energy and Southwest Gas
Can any of the company-specific risk be diversified away by investing in both Eversource 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 Eversource 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 Eversource Energy and Southwest Gas Holdings, you can compare the effects of market volatilities on Eversource 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 Eversource Energy with a short position of Southwest Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eversource Energy and Southwest Gas.
Diversification Opportunities for Eversource Energy and Southwest Gas
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Eversource and Southwest is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy 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 Eversource 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 Eversource Energy 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 Eversource Energy i.e., Eversource Energy and Southwest Gas go up and down completely randomly.
Pair Corralation between Eversource Energy and Southwest Gas
Allowing for the 90-day total investment horizon Eversource Energy is expected to under-perform the Southwest Gas. But the stock apears to be less risky and, when comparing its historical volatility, Eversource Energy is 1.06 times less risky than Southwest Gas. The stock trades about -0.02 of its potential returns per unit of risk. The Southwest Gas Holdings is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 6,548 in Southwest Gas Holdings on August 30, 2024 and sell it today you would earn a total of 1,282 from holding Southwest Gas Holdings or generate 19.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eversource Energy vs. Southwest Gas Holdings
Performance |
| Timeline |
| Eversource Energy |
| Southwest Gas Holdings |
Eversource Energy and Southwest Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eversource Energy and Southwest Gas
The main advantage of trading using opposite Eversource Energy and Southwest Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eversource 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.| Eversource Energy vs. CenterPoint Energy | Eversource Energy vs. FirstEnergy | Eversource Energy vs. Pinnacle West Capital | Eversource Energy vs. Edison International |
| 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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