Correlation Between Southwest Gas and Plexus Corp
Can any of the company-specific risk be diversified away by investing in both Southwest Gas and Plexus Corp 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 Plexus Corp 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 Plexus Corp, you can compare the effects of market volatilities on Southwest Gas and Plexus Corp 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 Plexus Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Gas and Plexus Corp.
Diversification Opportunities for Southwest Gas and Plexus Corp
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and Plexus is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Gas Holdings and Plexus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plexus Corp 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 Plexus Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plexus Corp has no effect on the direction of Southwest Gas i.e., Southwest Gas and Plexus Corp go up and down completely randomly.
Pair Corralation between Southwest Gas and Plexus Corp
Considering the 90-day investment horizon Southwest Gas is expected to generate 1.74 times less return on investment than Plexus Corp. But when comparing it to its historical volatility, Southwest Gas Holdings is 1.32 times less risky than Plexus Corp. It trades about 0.08 of its potential returns per unit of risk. Plexus Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 10,091 in Plexus Corp on September 2, 2024 and sell it today you would earn a total of 6,349 from holding Plexus Corp or generate 62.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southwest Gas Holdings vs. Plexus Corp
Performance |
| Timeline |
| Southwest Gas Holdings |
| Plexus Corp |
Southwest Gas and Plexus Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Gas and Plexus Corp
The main advantage of trading using opposite Southwest Gas and Plexus Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Gas position performs unexpectedly, Plexus Corp 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 Plexus Corp will offset losses from the drop in Plexus Corp'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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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