Correlation Between NorthWestern and Atmos Energy
Can any of the company-specific risk be diversified away by investing in both NorthWestern and Atmos 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 NorthWestern and Atmos Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorthWestern and Atmos Energy, you can compare the effects of market volatilities on NorthWestern and Atmos 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 NorthWestern with a short position of Atmos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorthWestern and Atmos Energy.
Diversification Opportunities for NorthWestern and Atmos Energy
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NorthWestern and Atmos is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding NorthWestern and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy and NorthWestern 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 NorthWestern are associated (or correlated) with Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of NorthWestern i.e., NorthWestern and Atmos Energy go up and down completely randomly.
Pair Corralation between NorthWestern and Atmos Energy
Considering the 90-day investment horizon NorthWestern is expected to generate 1.88 times less return on investment than Atmos Energy. In addition to that, NorthWestern is 1.38 times more volatile than Atmos Energy. It trades about 0.12 of its total potential returns per unit of risk. Atmos Energy is currently generating about 0.3 per unit of volatility. 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 |
NorthWestern vs. Atmos Energy
Performance |
| Timeline |
| NorthWestern |
| Atmos Energy |
NorthWestern and Atmos Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorthWestern and Atmos Energy
The main advantage of trading using opposite NorthWestern and Atmos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorthWestern position performs unexpectedly, Atmos 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 Atmos Energy will offset losses from the drop in Atmos Energy's long position.| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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