Correlation Between Suburban Propane and Southwest Gas
Can any of the company-specific risk be diversified away by investing in both Suburban Propane 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 Suburban Propane and Southwest Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Suburban Propane Partners and Southwest Gas Holdings, you can compare the effects of market volatilities on Suburban Propane 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 Suburban Propane with a short position of Southwest Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suburban Propane and Southwest Gas.
Diversification Opportunities for Suburban Propane and Southwest Gas
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Suburban and Southwest is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Suburban Propane Partners 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 Suburban Propane 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 Suburban Propane Partners 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 Suburban Propane i.e., Suburban Propane and Southwest Gas go up and down completely randomly.
Pair Corralation between Suburban Propane and Southwest Gas
Considering the 90-day investment horizon Suburban Propane is expected to generate 1.33 times less return on investment than Southwest Gas. In addition to that, Suburban Propane is 1.53 times more volatile than Southwest Gas Holdings. It trades about 0.1 of its total potential returns per unit of risk. Southwest Gas Holdings is currently generating about 0.21 per unit of volatility. If you would invest 7,299 in Southwest Gas Holdings on August 31, 2024 and sell it today you would earn a total of 531.00 from holding Southwest Gas Holdings or generate 7.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Suburban Propane Partners vs. Southwest Gas Holdings
Performance |
| Timeline |
| Suburban Propane Partners |
| Southwest Gas Holdings |
Suburban Propane and Southwest Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Suburban Propane and Southwest Gas
The main advantage of trading using opposite Suburban Propane and Southwest Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suburban Propane 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.| Suburban Propane vs. Northwest Natural Gas | Suburban Propane vs. NewJersey Resources | Suburban Propane vs. Atmos Energy | Suburban Propane vs. Chesapeake Utilities |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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