Correlation Between Southwest Gas and One Gas
Can any of the company-specific risk be diversified away by investing in both Southwest Gas and One Gas 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 One Gas 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 One Gas, you can compare the effects of market volatilities on Southwest Gas and One Gas 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 One Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Gas and One Gas.
Diversification Opportunities for Southwest Gas and One Gas
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southwest and One is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Gas Holdings and One Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Gas 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 One Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Gas has no effect on the direction of Southwest Gas i.e., Southwest Gas and One Gas go up and down completely randomly.
Pair Corralation between Southwest Gas and One Gas
Considering the 90-day investment horizon Southwest Gas is expected to generate 5.9 times less return on investment than One Gas. In addition to that, Southwest Gas is 1.15 times more volatile than One Gas. It trades about 0.03 of its total potential returns per unit of risk. One Gas is currently generating about 0.18 per unit of volatility. If you would invest 5,801 in One Gas on August 24, 2024 and sell it today you would earn a total of 1,887 from holding One Gas or generate 32.53% 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. One Gas
Performance |
| Timeline |
| Southwest Gas Holdings |
| One Gas |
Southwest Gas and One Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Gas and One Gas
The main advantage of trading using opposite Southwest Gas and One Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Gas position performs unexpectedly, One Gas 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 One Gas will offset losses from the drop in One Gas' long position.| Southwest Gas vs. NewJersey Resources | Southwest Gas vs. Northwest Natural Gas | Southwest Gas vs. NorthWestern | Southwest Gas vs. Chesapeake Utilities |
| One Gas vs. Northwest Natural Gas | One Gas vs. Chesapeake Utilities | One Gas vs. NewJersey Resources | One Gas vs. RGC Resources |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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