Correlation Between Naturgy Energy and Tokyo Gas

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

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

Diversification Opportunities for Naturgy Energy and Tokyo Gas

0.47

Correlation Coefficient

Naturgy Energy  Tokyo Gas

Very weak diversification

The 3 months correlation between Naturgy and Tokyo is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Naturgy Energy Group and Tokyo Gas CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Gas CoLtd and Naturgy 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 Naturgy Energy Group are associated (or correlated) with Tokyo Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Gas CoLtd has no effect on the direction of Naturgy Energy i.e., Naturgy Energy and Tokyo Gas go up and down completely randomly.

Pair Corralation between Naturgy Energy and Tokyo Gas

Assuming the 90 days horizon Naturgy Energy Group is expected to generate 0.58 times more return on investment than Tokyo Gas. However, Naturgy Energy Group is 1.72 times less risky than Tokyo Gas. It trades about 0.04 of its potential returns per unit of risk. Tokyo Gas CoLtd is currently generating about -0.16 per unit of risk. If you would invest  2,358  in Naturgy Energy Group on October 11, 2024 and sell it today you would earn a total of  14.00  from holding Naturgy Energy Group or generate 0.59% return on investment over 90 days.

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

Naturgy Energy Group  vs.  Tokyo Gas CoLtd

Naturgy Energy Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Naturgy Energy Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Naturgy Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tokyo Gas CoLtd

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyo Gas CoLtd are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tokyo Gas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Naturgy Energy and Tokyo Gas

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

The idea behind Naturgy Energy Group and Tokyo Gas CoLtd 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.