Correlation Between Southwest Gas and Asbury Automotive
Can any of the company-specific risk be diversified away by investing in both Southwest Gas and Asbury Automotive 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 Southwest Gas and Asbury Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southwest Gas Holdings and Asbury Automotive Group, you can compare the effects of market volatilities on Southwest Gas and Asbury Automotive 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 Southwest Gas with a short position of Asbury Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Gas and Asbury Automotive.
Diversification Opportunities for Southwest Gas and Asbury Automotive
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and Asbury is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Gas Holdings and Asbury Automotive Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asbury Automotive and Southwest Gas 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 Southwest Gas Holdings are associated (or correlated) with Asbury Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asbury Automotive has no effect on the direction of Southwest Gas i.e., Southwest Gas and Asbury Automotive go up and down completely randomly.
Pair Corralation between Southwest Gas and Asbury Automotive
Considering the 90-day investment horizon Southwest Gas Holdings is expected to generate 0.68 times more return on investment than Asbury Automotive. However, Southwest Gas Holdings is 1.47 times less risky than Asbury Automotive. It trades about 0.08 of its potential returns per unit of risk. Asbury Automotive Group is currently generating about 0.04 per unit of risk. If you would invest 5,911 in Southwest Gas Holdings on September 2, 2024 and sell it today you would earn a total of 1,905 from holding Southwest Gas Holdings or generate 32.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Gas Holdings vs. Asbury Automotive Group
Performance |
| Timeline |
| Southwest Gas Holdings |
| Asbury Automotive |
Southwest Gas and Asbury Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Gas and Asbury Automotive
The main advantage of trading using opposite Southwest Gas and Asbury Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Gas position performs unexpectedly, Asbury Automotive 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 Asbury Automotive will offset losses from the drop in Asbury Automotive's long position.| Southwest Gas vs. NewJersey Resources | Southwest Gas vs. Northwest Natural Gas | Southwest Gas vs. NorthWestern | Southwest Gas vs. Chesapeake Utilities |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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