Correlation Between Southwest Gas and JD Sports

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

Diversification Opportunities for Southwest Gas and JD Sports

-0.8

Correlation Coefficient

Southwest Gas  JD Sports

Pay attention - limited upside

The 3 months correlation between Southwest and JDDSF is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Southwest Gas Holdings and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion 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 JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of Southwest Gas i.e., Southwest Gas and JD Sports go up and down completely randomly.

Pair Corralation between Southwest Gas and JD Sports

Considering the 90-day investment horizon Southwest Gas Holdings is expected to generate 0.5 times more return on investment than JD Sports. However, Southwest Gas Holdings is 2.01 times less risky than JD Sports. It trades about 0.05 of its potential returns per unit of risk. JD Sports Fashion is currently generating about -0.17 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	Significant
Accuracy	100.0%
Values	Daily Returns

Southwest Gas Holdings  vs.  JD Sports Fashion

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.

JD Sports Fashion

Risk-Adjusted Performance

Very Weak

Over the last 90 days JD Sports Fashion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Southwest Gas and JD Sports

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

The idea behind Southwest Gas Holdings and JD Sports Fashion 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.