Correlation Between Cadiz Depositary and Southern
Can any of the company-specific risk be diversified away by investing in both Cadiz Depositary 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 Cadiz Depositary and Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cadiz Depositary Shares and Southern Co, you can compare the effects of market volatilities on Cadiz Depositary 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 Cadiz Depositary with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadiz Depositary and Southern.
Diversification Opportunities for Cadiz Depositary and Southern
-0.82 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cadiz and Southern is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Cadiz Depositary Shares and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and Cadiz Depositary 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 Cadiz Depositary Shares 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 Cadiz Depositary i.e., Cadiz Depositary and Southern go up and down completely randomly.
Pair Corralation between Cadiz Depositary and Southern
Assuming the 90 days horizon Cadiz Depositary Shares is expected to generate 1.33 times more return on investment than Southern. However, Cadiz Depositary is 1.33 times more volatile than Southern Co. It trades about 0.43 of its potential returns per unit of risk. Southern Co is currently generating about 0.17 per unit of risk. If you would invest 1,645 in Cadiz Depositary Shares on October 24, 2024 and sell it today you would earn a total of 180.00 from holding Cadiz Depositary Shares or generate 10.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cadiz Depositary Shares vs. Southern Co
Performance |
| Timeline |
| Cadiz Depositary Shares |
| Southern |
Cadiz Depositary and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadiz Depositary and Southern
The main advantage of trading using opposite Cadiz Depositary and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadiz Depositary 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.The idea behind Cadiz Depositary Shares and Southern Co 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.| 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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