Correlation Between Southwest Gas and Chesapeake Utilities
Can any of the company-specific risk be diversified away by investing in both Southwest Gas and Chesapeake Utilities 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 Chesapeake Utilities 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 Chesapeake Utilities, you can compare the effects of market volatilities on Southwest Gas and Chesapeake Utilities 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 Chesapeake Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Gas and Chesapeake Utilities.
Diversification Opportunities for Southwest Gas and Chesapeake Utilities
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southwest and Chesapeake is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Gas Holdings and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities 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 Chesapeake Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Utilities has no effect on the direction of Southwest Gas i.e., Southwest Gas and Chesapeake Utilities go up and down completely randomly.
Pair Corralation between Southwest Gas and Chesapeake Utilities
Considering the 90-day investment horizon Southwest Gas Holdings is expected to generate 1.12 times more return on investment than Chesapeake Utilities. However, Southwest Gas is 1.12 times more volatile than Chesapeake Utilities. It trades about 0.03 of its potential returns per unit of risk. Chesapeake Utilities is currently generating about 0.03 per unit of risk. If you would invest 6,408 in Southwest Gas Holdings on August 27, 2024 and sell it today you would earn a total of 1,343 from holding Southwest Gas Holdings or generate 20.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Gas Holdings vs. Chesapeake Utilities
Performance |
| Timeline |
| Southwest Gas Holdings |
| Chesapeake Utilities |
Southwest Gas and Chesapeake Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Gas and Chesapeake Utilities
The main advantage of trading using opposite Southwest Gas and Chesapeake Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Gas position performs unexpectedly, Chesapeake Utilities 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 Chesapeake Utilities will offset losses from the drop in Chesapeake Utilities' long position.The idea behind Southwest Gas Holdings and Chesapeake Utilities pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Chesapeake Utilities vs. Northwest Natural Gas | Chesapeake Utilities vs. One Gas | Chesapeake Utilities vs. NewJersey Resources | Chesapeake Utilities vs. Spire Inc |
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 CEOs Directory module to screen CEOs from public companies around the world.
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency |