Correlation Between UGI and Northwest Natural
Can any of the company-specific risk be diversified away by investing in both UGI and Northwest Natural 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 Northwest Natural into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UGI Corporation and Northwest Natural Gas, you can compare the effects of market volatilities on UGI and Northwest Natural 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 Northwest Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of UGI and Northwest Natural.
Diversification Opportunities for UGI and Northwest Natural
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between UGI and Northwest is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding UGI Corp. and Northwest Natural Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Natural Gas 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 Northwest Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Natural Gas has no effect on the direction of UGI i.e., UGI and Northwest Natural go up and down completely randomly.
Pair Corralation between UGI and Northwest Natural
Considering the 90-day investment horizon UGI Corporation is expected to generate 2.35 times more return on investment than Northwest Natural. However, UGI is 2.35 times more volatile than Northwest Natural Gas. It trades about 0.19 of its potential returns per unit of risk. Northwest Natural Gas 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
UGI Corp. vs. Northwest Natural Gas
Performance |
| Timeline |
| UGI Corporation |
| Northwest Natural Gas |
UGI and Northwest Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UGI and Northwest Natural
The main advantage of trading using opposite UGI and Northwest Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UGI position performs unexpectedly, Northwest Natural 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 Northwest Natural will offset losses from the drop in Northwest Natural's long position.The idea behind UGI Corporation and Northwest Natural Gas 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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