Correlation Between Southwest Gas and BZAM
Can any of the company-specific risk be diversified away by investing in both Southwest Gas and BZAM 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 BZAM 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 BZAM, you can compare the effects of market volatilities on Southwest Gas and BZAM 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 BZAM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Gas and BZAM.
Diversification Opportunities for Southwest Gas and BZAM
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Southwest and BZAM is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Gas Holdings and BZAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZAM 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 BZAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZAM has no effect on the direction of Southwest Gas i.e., Southwest Gas and BZAM go up and down completely randomly.
Pair Corralation between Southwest Gas and BZAM
Considering the 90-day investment horizon Southwest Gas is expected to generate 131.12 times less return on investment than BZAM. But when comparing it to its historical volatility, Southwest Gas Holdings is 78.45 times less risky than BZAM. It trades about 0.05 of its potential returns per unit of risk. BZAM is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 3.20 in BZAM on September 1, 2024 and sell it today you would lose (3.20) from holding BZAM or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Southwest Gas Holdings vs. BZAM
Performance |
| Timeline |
| Southwest Gas Holdings |
| BZAM |
Southwest Gas and BZAM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Gas and BZAM
The main advantage of trading using opposite Southwest Gas and BZAM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Gas position performs unexpectedly, BZAM 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 BZAM will offset losses from the drop in BZAM's long position.| 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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