Correlation Between Southwest Gas and Japan Tobacco
Can any of the company-specific risk be diversified away by investing in both Southwest Gas and Japan Tobacco 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 Japan Tobacco 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 Japan Tobacco ADR, you can compare the effects of market volatilities on Southwest Gas and Japan Tobacco 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 Japan Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Gas and Japan Tobacco.
Diversification Opportunities for Southwest Gas and Japan Tobacco
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Southwest and Japan is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Gas Holdings and Japan Tobacco ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Tobacco ADR 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 Japan Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Tobacco ADR has no effect on the direction of Southwest Gas i.e., Southwest Gas and Japan Tobacco go up and down completely randomly.
Pair Corralation between Southwest Gas and Japan Tobacco
Considering the 90-day investment horizon Southwest Gas Holdings is expected to generate 1.46 times more return on investment than Japan Tobacco. However, Southwest Gas is 1.46 times more volatile than Japan Tobacco ADR. It trades about 0.23 of its potential returns per unit of risk. Japan Tobacco ADR is currently generating about 0.08 per unit of risk. If you would invest 7,265 in Southwest Gas Holdings on September 1, 2024 and sell it today you would earn a total of 551.00 from holding Southwest Gas Holdings or generate 7.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Gas Holdings vs. Japan Tobacco ADR
Performance |
| Timeline |
| Southwest Gas Holdings |
| Japan Tobacco ADR |
Southwest Gas and Japan Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Gas and Japan Tobacco
The main advantage of trading using opposite Southwest Gas and Japan Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Gas position performs unexpectedly, Japan Tobacco 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 Japan Tobacco will offset losses from the drop in Japan Tobacco's long position.| Southwest Gas vs. NewJersey Resources | Southwest Gas vs. Northwest Natural Gas | Southwest Gas vs. NorthWestern | Southwest Gas vs. Chesapeake Utilities |
| Japan Tobacco vs. British American Tobacco | Japan Tobacco vs. Imperial Brands PLC | Japan Tobacco vs. RLX Technology | Japan Tobacco vs. British American Tobacco |
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 Directory module to find actively traded commodities issued by global exchanges.
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