Correlation Between Southwest Gas and II-VI Incorporated
Can any of the company-specific risk be diversified away by investing in both Southwest Gas and II-VI Incorporated 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 II-VI Incorporated 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 II VI Incorporated, you can compare the effects of market volatilities on Southwest Gas and II-VI Incorporated 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 II-VI Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Gas and II-VI Incorporated.
Diversification Opportunities for Southwest Gas and II-VI Incorporated
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southwest and II-VI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Gas Holdings and II VI Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on II-VI Incorporated 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 II-VI Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of II-VI Incorporated has no effect on the direction of Southwest Gas i.e., Southwest Gas and II-VI Incorporated go up and down completely randomly.
Pair Corralation between Southwest Gas and II-VI Incorporated
Considering the 90-day investment horizon Southwest Gas is expected to generate 4.34 times less return on investment than II-VI Incorporated. But when comparing it to its historical volatility, Southwest Gas Holdings is 1.43 times less risky than II-VI Incorporated. It trades about 0.03 of its potential returns per unit of risk. II VI Incorporated is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 17,170 in II VI Incorporated on September 3, 2024 and sell it today you would earn a total of 1,581 from holding II VI Incorporated or generate 9.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 9.9% |
| Values | Daily Returns |
Southwest Gas Holdings vs. II VI Incorporated
Performance |
| Timeline |
| Southwest Gas Holdings |
| II-VI Incorporated |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Southwest Gas and II-VI Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Gas and II-VI Incorporated
The main advantage of trading using opposite Southwest Gas and II-VI Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Gas position performs unexpectedly, II-VI Incorporated 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 II-VI Incorporated will offset losses from the drop in II-VI Incorporated'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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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