Correlation Between RGC Resources and Northwest Natural
Can any of the company-specific risk be diversified away by investing in both RGC Resources and Northwest Natural 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 RGC Resources and Northwest Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RGC Resources and Northwest Natural Gas, you can compare the effects of market volatilities on RGC Resources and Northwest Natural 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 RGC Resources with a short position of Northwest Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of RGC Resources and Northwest Natural.
Diversification Opportunities for RGC Resources and Northwest Natural
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between RGC and Northwest is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding RGC Resources and Northwest Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Natural Gas and RGC Resources 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 RGC Resources are associated (or correlated) with Northwest Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Natural Gas has no effect on the direction of RGC Resources i.e., RGC Resources and Northwest Natural go up and down completely randomly.
Pair Corralation between RGC Resources and Northwest Natural
Given the investment horizon of 90 days RGC Resources is expected to generate 1.93 times more return on investment than Northwest Natural. However, RGC Resources is 1.93 times more volatile than Northwest Natural Gas. It trades about 0.05 of its potential returns per unit of risk. Northwest Natural Gas is currently generating about 0.03 per unit of risk. If you would invest 1,970 in RGC Resources on November 2, 2024 and sell it today you would earn a total of 182.00 from holding RGC Resources or generate 9.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
RGC Resources vs. Northwest Natural Gas
Performance |
| Timeline |
| RGC Resources |
| Northwest Natural Gas |
RGC Resources and Northwest Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RGC Resources and Northwest Natural
The main advantage of trading using opposite RGC Resources and Northwest Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RGC Resources position performs unexpectedly, Northwest Natural 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 Northwest Natural will offset losses from the drop in Northwest Natural's long position.| RGC Resources vs. NewJersey Resources | RGC Resources vs. One Gas | RGC Resources vs. Northwest Natural Gas | RGC Resources vs. Chesapeake Utilities |
| Northwest Natural vs. Chesapeake Utilities | Northwest Natural vs. One Gas | Northwest Natural vs. NiSource | Northwest Natural 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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