Correlation Between Northwest Natural and Spire
Can any of the company-specific risk be diversified away by investing in both Northwest Natural and Spire 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 Spire 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 Spire Inc, you can compare the effects of market volatilities on Northwest Natural and Spire 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 Spire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Northwest Natural and Spire.
Diversification Opportunities for Northwest Natural and Spire
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Northwest and Spire is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Northwest Natural Gas and Spire Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Inc 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 Spire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Inc has no effect on the direction of Northwest Natural i.e., Northwest Natural and Spire go up and down completely randomly.
Pair Corralation between Northwest Natural and Spire
Considering the 90-day investment horizon Northwest Natural is expected to generate 2.65 times less return on investment than Spire. But when comparing it to its historical volatility, Northwest Natural Gas is 1.16 times less risky than Spire. It trades about 0.03 of its potential returns per unit of risk. Spire Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 6,467 in Spire Inc on November 2, 2024 and sell it today you would earn a total of 697.00 from holding Spire Inc or generate 10.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Northwest Natural Gas vs. Spire Inc
Performance |
| Timeline |
| Northwest Natural Gas |
| Spire Inc |
Northwest Natural and Spire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Northwest Natural and Spire
The main advantage of trading using opposite Northwest Natural and Spire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Northwest Natural position performs unexpectedly, Spire 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 Spire will offset losses from the drop in Spire's long position.| Northwest Natural vs. Chesapeake Utilities | Northwest Natural vs. One Gas | Northwest Natural vs. NiSource | Northwest Natural vs. NewJersey Resources |
| Spire vs. Northwest Natural Gas | Spire vs. Chesapeake Utilities | Spire vs. One Gas | Spire vs. NewJersey Resources |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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