Correlation Between Atmos Energy and NewJersey Resources

Can any of the company-specific risk be diversified away by investing in both Atmos Energy and NewJersey Resources 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 Atmos Energy and NewJersey Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Atmos Energy and NewJersey Resources, you can compare the effects of market volatilities on Atmos Energy and NewJersey Resources 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 Atmos Energy with a short position of NewJersey Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Atmos Energy and NewJersey Resources.

Diversification Opportunities for Atmos Energy and NewJersey Resources

0.6

Correlation Coefficient

Atmos Energy  NewJersey Resources

Poor diversification

The 3 months correlation between Atmos and NewJersey is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Atmos Energy and NewJersey Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewJersey Resources and Atmos Energy 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 Atmos Energy are associated (or correlated) with NewJersey Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewJersey Resources has no effect on the direction of Atmos Energy i.e., Atmos Energy and NewJersey Resources go up and down completely randomly.

Pair Corralation between Atmos Energy and NewJersey Resources

Considering the 90-day investment horizon Atmos Energy is expected to generate 0.94 times more return on investment than NewJersey Resources. However, Atmos Energy is 1.07 times less risky than NewJersey Resources. It trades about 0.01 of its potential returns per unit of risk. NewJersey Resources is currently generating about -0.08 per unit of risk. If you would invest  15,044  in Atmos Energy on November 28, 2024 and sell it today you would lose (5.00) from holding Atmos Energy or give up 0.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Atmos Energy  vs.  NewJersey Resources

Atmos Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Atmos Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Atmos Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

NewJersey Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days NewJersey Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's forward-looking indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Atmos Energy and NewJersey Resources

The main advantage of trading using opposite Atmos Energy and NewJersey Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Atmos Energy position performs unexpectedly, NewJersey Resources 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 NewJersey Resources will offset losses from the drop in NewJersey Resources' long position.

The idea behind Atmos Energy and NewJersey Resources 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.