Correlation Between Southwest Gas and ScanSource
Can any of the company-specific risk be diversified away by investing in both Southwest Gas and ScanSource 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 ScanSource 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 ScanSource, you can compare the effects of market volatilities on Southwest Gas and ScanSource 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 ScanSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Gas and ScanSource.
Diversification Opportunities for Southwest Gas and ScanSource
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southwest and ScanSource is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Gas Holdings and ScanSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ScanSource 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 ScanSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ScanSource has no effect on the direction of Southwest Gas i.e., Southwest Gas and ScanSource go up and down completely randomly.
Pair Corralation between Southwest Gas and ScanSource
Considering the 90-day investment horizon Southwest Gas is expected to generate 1.98 times less return on investment than ScanSource. But when comparing it to its historical volatility, Southwest Gas Holdings is 2.1 times less risky than ScanSource. It trades about 0.2 of its potential returns per unit of risk. ScanSource is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 4,428 in ScanSource on August 31, 2024 and sell it today you would earn a total of 613.00 from holding ScanSource or generate 13.84% 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. ScanSource
Performance |
| Timeline |
| Southwest Gas Holdings |
| ScanSource |
Southwest Gas and ScanSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southwest Gas and ScanSource
The main advantage of trading using opposite Southwest Gas and ScanSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Gas position performs unexpectedly, ScanSource 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 ScanSource will offset losses from the drop in ScanSource's long position.| Southwest Gas vs. NewJersey Resources | Southwest Gas vs. Northwest Natural Gas | Southwest Gas vs. NorthWestern | Southwest Gas vs. Chesapeake Utilities |
| ScanSource vs. Climb Global Solutions | ScanSource vs. Insight Enterprises | ScanSource vs. Synnex | ScanSource vs. PC Connection |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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