Correlation Between Brunswick and Southwest Gas

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

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

Diversification Opportunities for Brunswick and Southwest Gas

-0.21

Correlation Coefficient

Brunswick  Southwest Gas

Very good diversification

The 3 months correlation between Brunswick and Southwest is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick 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 Brunswick 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 Brunswick 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 Brunswick i.e., Brunswick and Southwest Gas go up and down completely randomly.

Pair Corralation between Brunswick and Southwest Gas

Allowing for the 90-day total investment horizon Brunswick is expected to under-perform the Southwest Gas. In addition to that, Brunswick is 1.46 times more volatile than Southwest Gas Holdings. It trades about -0.1 of its total potential returns per unit of risk. Southwest Gas Holdings is currently generating about 0.06 per unit of volatility. If you would invest  6,967  in Southwest Gas Holdings on December 29, 2024 and sell it today you would earn a total of  330.00  from holding Southwest Gas Holdings or generate 4.74% return on investment over 90 days.

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

Brunswick  vs.  Southwest Gas Holdings

Brunswick

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brunswick has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Southwest Gas Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Southwest Gas Holdings are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Southwest Gas is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Brunswick and Southwest Gas

The main advantage of trading using opposite Brunswick and Southwest Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunswick 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.

The idea behind Brunswick and Southwest Gas Holdings 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.