Correlation Between Evergy, and Southwest Gas
Can any of the company-specific risk be diversified away by investing in both Evergy, 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 Evergy, and Southwest Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evergy, and Southwest Gas Holdings, you can compare the effects of market volatilities on Evergy, 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 Evergy, with a short position of Southwest Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evergy, and Southwest Gas.
Diversification Opportunities for Evergy, and Southwest Gas
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Evergy, and Southwest is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Evergy, 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 Evergy, 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 Evergy, 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 Evergy, i.e., Evergy, and Southwest Gas go up and down completely randomly.
Pair Corralation between Evergy, and Southwest Gas
Given the investment horizon of 90 days Evergy, is expected to generate 0.54 times more return on investment than Southwest Gas. However, Evergy, is 1.84 times less risky than Southwest Gas. It trades about 0.49 of its potential returns per unit of risk. Southwest Gas Holdings is currently generating about 0.23 per unit of risk. If you would invest 5,929 in Evergy, on August 30, 2024 and sell it today you would earn a total of 571.00 from holding Evergy, or generate 9.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Evergy, vs. Southwest Gas Holdings
Performance |
| Timeline |
| Evergy, |
| Southwest Gas Holdings |
Evergy, and Southwest Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evergy, and Southwest Gas
The main advantage of trading using opposite Evergy, and Southwest Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evergy, 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.| Evergy, vs. DTE Energy | Evergy, vs. Ameren Corp | Evergy, vs. CenterPoint Energy | Evergy, vs. Pinnacle West Capital |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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