Correlation Between Western Midstream and Southwest Gas
Can any of the company-specific risk be diversified away by investing in both Western Midstream and Southwest 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 Western Midstream and Southwest Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Midstream Partners and Southwest Gas Holdings, you can compare the effects of market volatilities on Western Midstream and Southwest 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 Western Midstream with a short position of Southwest Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Midstream and Southwest Gas.
Diversification Opportunities for Western Midstream and Southwest Gas
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Western and Southwest is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Western Midstream Partners and Southwest Gas Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Gas Holdings and Western Midstream 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 Western Midstream Partners are associated (or correlated) with Southwest Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Gas Holdings has no effect on the direction of Western Midstream i.e., Western Midstream and Southwest Gas go up and down completely randomly.
Pair Corralation between Western Midstream and Southwest Gas
Considering the 90-day investment horizon Western Midstream is expected to generate 1.12 times less return on investment than Southwest Gas. In addition to that, Western Midstream is 1.12 times more volatile than Southwest Gas Holdings. It trades about 0.11 of its total potential returns per unit of risk. Southwest Gas Holdings is currently generating about 0.14 per unit of volatility. If you would invest 6,967 in Southwest Gas Holdings on November 30, 2024 and sell it today you would earn a total of 538.00 from holding Southwest Gas Holdings or generate 7.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Midstream Partners vs. Southwest Gas Holdings
Performance |
| Timeline |
| Western Midstream |
| Southwest Gas Holdings |
Western Midstream and Southwest Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Midstream and Southwest Gas
The main advantage of trading using opposite Western Midstream and Southwest Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Midstream position performs unexpectedly, Southwest 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 Southwest Gas will offset losses from the drop in Southwest Gas' long position.| Western Midstream vs. DT Midstream | Western Midstream vs. MPLX LP | Western Midstream vs. Plains All American | Western Midstream vs. Genesis Energy LP |
| Southwest Gas vs. NewJersey Resources | Southwest Gas vs. Northwest Natural Gas | Southwest Gas vs. NorthWestern | Southwest Gas vs. Chesapeake Utilities |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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