Correlation Between Southwest Gas and PGE Corp
Can any of the company-specific risk be diversified away by investing in both Southwest Gas and PGE 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 PGE 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 PGE Corp, you can compare the effects of market volatilities on Southwest Gas and PGE 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 PGE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Gas and PGE Corp.
Diversification Opportunities for Southwest Gas and PGE Corp
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southwest and PGE is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Gas Holdings and PGE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE 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 PGE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corp has no effect on the direction of Southwest Gas i.e., Southwest Gas and PGE Corp go up and down completely randomly.
Pair Corralation between Southwest Gas and PGE Corp
Considering the 90-day investment horizon Southwest Gas Holdings is expected to under-perform the PGE Corp. In addition to that, Southwest Gas is 1.48 times more volatile than PGE Corp. It trades about -0.06 of its total potential returns per unit of risk. PGE Corp is currently generating about 0.06 per unit of volatility. If you would invest 1,783 in PGE Corp on March 11, 2024 and sell it today you would earn a total of 22.00 from holding PGE Corp or generate 1.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Southwest Gas Holdings vs. PGE Corp
Performance |
Timeline |
Southwest Gas Holdings |
PGE Corp |
Southwest Gas and PGE Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Southwest Gas and PGE Corp
The main advantage of trading using opposite Southwest Gas and PGE Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southwest Gas position performs unexpectedly, PGE 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 PGE Corp will offset losses from the drop in PGE Corp's long position.Southwest Gas vs. NewJersey Resources | Southwest Gas vs. One Gas | Southwest Gas vs. Northwest Natural Gas | Southwest Gas vs. UGI Corp Unit |
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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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