Correlation Between Southwest Gas and Empresa Distribuidora

Can any of the company-specific risk be diversified away by investing in both Southwest Gas and Empresa Distribuidora 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 Empresa Distribuidora 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 Empresa Distribuidora y, you can compare the effects of market volatilities on Southwest Gas and Empresa Distribuidora 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 Empresa Distribuidora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southwest Gas and Empresa Distribuidora.

Diversification Opportunities for Southwest Gas and Empresa Distribuidora

-0.31

Correlation Coefficient

Southwest Gas  Empresa Distribuidora

Very good diversification

The 3 months correlation between Southwest and Empresa is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Gas Holdings and Empresa Distribuidora y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora 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 Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of Southwest Gas i.e., Southwest Gas and Empresa Distribuidora go up and down completely randomly.

Pair Corralation between Southwest Gas and Empresa Distribuidora

Considering the 90-day investment horizon Southwest Gas Holdings is expected to generate 0.33 times more return on investment than Empresa Distribuidora. However, Southwest Gas Holdings is 3.05 times less risky than Empresa Distribuidora. It trades about 0.05 of its potential returns per unit of risk. Empresa Distribuidora y is currently generating about -0.1 per unit of risk. If you would invest  6,967  in Southwest Gas Holdings on December 29, 2024 and sell it today you would earn a total of  240.00  from holding Southwest Gas Holdings or generate 3.44% return on investment over 90 days.

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

Southwest Gas Holdings  vs.  Empresa Distribuidora y

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 3 (%) 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.

Empresa Distribuidora

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empresa Distribuidora y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Southwest Gas and Empresa Distribuidora

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

The idea behind Southwest Gas Holdings and Empresa Distribuidora y 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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.