Correlation Between Northwest Natural and NewJersey Resources
Can any of the company-specific risk be diversified away by investing in both Northwest Natural and NewJersey Resources 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 Northwest Natural and NewJersey Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Northwest Natural Gas and NewJersey Resources, you can compare the effects of market volatilities on Northwest Natural and NewJersey Resources 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 Northwest Natural with a short position of NewJersey Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northwest Natural and NewJersey Resources.
Diversification Opportunities for Northwest Natural and NewJersey Resources
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Northwest and NewJersey is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Natural Gas and NewJersey Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewJersey Resources and Northwest Natural 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 Northwest Natural Gas are associated (or correlated) with NewJersey Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewJersey Resources has no effect on the direction of Northwest Natural i.e., Northwest Natural and NewJersey Resources go up and down completely randomly.
Pair Corralation between Northwest Natural and NewJersey Resources
Considering the 90-day investment horizon Northwest Natural is expected to generate 1.37 times less return on investment than NewJersey Resources. In addition to that, Northwest Natural is 1.01 times more volatile than NewJersey Resources. It trades about 0.09 of its total potential returns per unit of risk. NewJersey Resources is currently generating about 0.13 per unit of volatility. If you would invest 4,603 in NewJersey Resources on October 20, 2024 and sell it today you would earn a total of 130.00 from holding NewJersey Resources or generate 2.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northwest Natural Gas vs. NewJersey Resources
Performance |
| Timeline |
| Northwest Natural Gas |
| NewJersey Resources |
Northwest Natural and NewJersey Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northwest Natural and NewJersey Resources
The main advantage of trading using opposite Northwest Natural and NewJersey Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northwest Natural position performs unexpectedly, NewJersey Resources 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 NewJersey Resources will offset losses from the drop in NewJersey Resources' long position.| Northwest Natural vs. Chesapeake Utilities | Northwest Natural vs. One Gas | Northwest Natural vs. NiSource | Northwest Natural vs. NewJersey Resources |
| NewJersey Resources vs. Atmos Energy | NewJersey Resources vs. UGI Corporation | NewJersey Resources vs. Chesapeake Utilities | NewJersey Resources vs. Spire Inc |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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