Correlation Between RGC Resources and One Gas

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

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

Diversification Opportunities for RGC Resources and One Gas

0.13

Correlation Coefficient

RGC Resources  One Gas

Average diversification

The 3 months correlation between RGC and One is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding RGC Resources and One Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on One Gas and RGC Resources 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 RGC Resources are associated (or correlated) with One Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of One Gas has no effect on the direction of RGC Resources i.e., RGC Resources and One Gas go up and down completely randomly.

Pair Corralation between RGC Resources and One Gas

Given the investment horizon of 90 days RGC Resources is expected to under-perform the One Gas. In addition to that, RGC Resources is 1.73 times more volatile than One Gas. It trades about -0.14 of its total potential returns per unit of risk. One Gas is currently generating about 0.28 per unit of volatility. If you would invest  6,999  in One Gas on November 28, 2024 and sell it today you would earn a total of  480.00  from holding One Gas or generate 6.86% return on investment over 90 days.

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

RGC Resources  vs.  One Gas

RGC Resources

Risk-Adjusted Performance

Very Weak

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

One Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days One Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, One Gas is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with RGC Resources and One Gas

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

The idea behind RGC Resources and One Gas 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.