Correlation Between Armada Hflr and SOUTHERN

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Can any of the company-specific risk be diversified away by investing in both Armada Hflr 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 Armada Hflr and SOUTHERN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Armada Hflr Pr and SOUTHERN CALIF EDISON, you can compare the effects of market volatilities on Armada Hflr 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 Armada Hflr with a short position of SOUTHERN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and SOUTHERN.

Diversification Opportunities for Armada Hflr and SOUTHERN

0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Armada and SOUTHERN is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and SOUTHERN CALIF EDISON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN CALIF EDISON and Armada Hflr 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 Armada Hflr Pr 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 CALIF EDISON has no effect on the direction of Armada Hflr i.e., Armada Hflr and SOUTHERN go up and down completely randomly.

Pair Corralation between Armada Hflr and SOUTHERN

Considering the 90-day investment horizon Armada Hflr Pr is expected to generate 1.63 times more return on investment than SOUTHERN. However, Armada Hflr is 1.63 times more volatile than SOUTHERN CALIF EDISON. It trades about 0.02 of its potential returns per unit of risk. SOUTHERN CALIF EDISON is currently generating about 0.01 per unit of risk. If you would invest  1,006  in Armada Hflr Pr on September 12, 2024 and sell it today you would earn a total of  91.00  from holding Armada Hflr Pr or generate 9.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy93.74%
ValuesDaily Returns

Armada Hflr Pr  vs.  SOUTHERN CALIF EDISON

 Performance 
       Timeline  
Armada Hflr Pr 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Armada Hflr is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
SOUTHERN CALIF EDISON 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SOUTHERN CALIF EDISON has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOUTHERN is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Armada Hflr and SOUTHERN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Armada Hflr and SOUTHERN

The main advantage of trading using opposite Armada Hflr and SOUTHERN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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.
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The idea behind Armada Hflr Pr and SOUTHERN CALIF EDISON 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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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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