Correlation Between Transportadora and Southwest Gas

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

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

Diversification Opportunities for Transportadora and Southwest Gas

-0.49

Correlation Coefficient

Transportadora  Southwest Gas

Very good diversification

The 3 months correlation between Transportadora and Southwest is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas 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 Transportadora 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 Transportadora de Gas 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 Transportadora i.e., Transportadora and Southwest Gas go up and down completely randomly.

Pair Corralation between Transportadora and Southwest Gas

Considering the 90-day investment horizon Transportadora de Gas is expected to under-perform the Southwest Gas. In addition to that, Transportadora is 2.15 times more volatile than Southwest Gas Holdings. It trades about -0.03 of its total potential returns per unit of risk. Southwest Gas Holdings is currently generating about 0.0 per unit of volatility. If you would invest  7,642  in Southwest Gas Holdings on December 4, 2024 and sell it today you would lose (60.00) from holding Southwest Gas Holdings or give up 0.79% of portfolio value over 90 days.

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

Transportadora de Gas  vs.  Southwest Gas Holdings

Transportadora de Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transportadora de Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Southwest Gas Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southwest Gas Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Transportadora and Southwest Gas

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

Check out your portfolio center.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.