Correlation Between UGI and Atmos Energy
Can any of the company-specific risk be diversified away by investing in both UGI and Atmos Energy 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 UGI and Atmos Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UGI Corporation and Atmos Energy, you can compare the effects of market volatilities on UGI and Atmos Energy 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 UGI with a short position of Atmos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of UGI and Atmos Energy.
Diversification Opportunities for UGI and Atmos Energy
0.31 | Correlation Coefficient |
Weak diversification
The 3 months correlation between UGI and Atmos is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding UGI Corp. and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy and UGI 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 UGI Corporation are associated (or correlated) with Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of UGI i.e., UGI and Atmos Energy go up and down completely randomly.
Pair Corralation between UGI and Atmos Energy
Considering the 90-day investment horizon UGI Corporation is expected to generate 3.7 times more return on investment than Atmos Energy. However, UGI is 3.7 times more volatile than Atmos Energy. It trades about 0.19 of its potential returns per unit of risk. Atmos Energy is currently generating about 0.3 per unit of risk. If you would invest 2,495 in UGI Corporation on August 27, 2024 and sell it today you would earn a total of 355.00 from holding UGI Corporation or generate 14.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
UGI Corp. vs. Atmos Energy
Performance |
| Timeline |
| UGI Corporation |
| Atmos Energy |
UGI and Atmos Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UGI and Atmos Energy
The main advantage of trading using opposite UGI and Atmos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UGI position performs unexpectedly, Atmos Energy 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 Atmos Energy will offset losses from the drop in Atmos Energy's long position.The idea behind UGI Corporation and Atmos Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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