Correlation Between American Financial and Southern
Can any of the company-specific risk be diversified away by investing in both American Financial and Southern 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 American Financial and Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Financial Group and Southern Co, you can compare the effects of market volatilities on American Financial and Southern 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 American Financial with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Financial and Southern.
Diversification Opportunities for American Financial and Southern
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between American and Southern is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and American Financial 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 American Financial Group are associated (or correlated) with Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of American Financial i.e., American Financial and Southern go up and down completely randomly.
Pair Corralation between American Financial and Southern
Given the investment horizon of 90 days American Financial Group is expected to generate about the same return on investment as Southern Co. However, American Financial is 1.44 times more volatile than Southern Co. It trades about 0.03 of its potential returns per unit of risk. Southern Co is currently producing about 0.04 per unit of risk. If you would invest 2,093 in Southern Co on August 25, 2024 and sell it today you would earn a total of 309.00 from holding Southern Co or generate 14.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
American Financial Group vs. Southern Co
Performance |
| Timeline |
| American Financial |
| Southern |
American Financial and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Financial and Southern
The main advantage of trading using opposite American Financial and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Financial position performs unexpectedly, Southern 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 Southern will offset losses from the drop in Southern's long position.| American Financial vs. American Financial Group | American Financial vs. American Financial Group | American Financial vs. American Financial Group | American Financial vs. Reinsurance Group of |
| Southern vs. Consumers Energy | Southern vs. CMS Energy | Southern vs. Cadiz Depositary Shares | Southern vs. DTE Energy |
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 Stocks Directory module to find actively traded stocks across global markets.
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