Correlation Between Carlyle and Southern
Can any of the company-specific risk be diversified away by investing in both Carlyle 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 Carlyle and Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Carlyle Group and Southern Co, you can compare the effects of market volatilities on Carlyle 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 Carlyle with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carlyle and Southern.
Diversification Opportunities for Carlyle and Southern
Modest diversification
The 3 months correlation between Carlyle and Southern is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding The Carlyle Group and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and Carlyle 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 The Carlyle 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 Carlyle i.e., Carlyle and Southern go up and down completely randomly.
Pair Corralation between Carlyle and Southern
Assuming the 90 days horizon The Carlyle Group is expected to under-perform the Southern. But the stock apears to be less risky and, when comparing its historical volatility, The Carlyle Group is 1.06 times less risky than Southern. The stock trades about -0.15 of its potential returns per unit of risk. The Southern Co is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest 2,256 in Southern Co on August 28, 2024 and sell it today you would lose (45.00) from holding Southern Co or give up 1.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Carlyle Group vs. Southern Co
Performance |
| Timeline |
| Carlyle Group |
| Southern |
Carlyle and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carlyle and Southern
The main advantage of trading using opposite Carlyle and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carlyle 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 The Carlyle Group 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. Southern Co | Southern vs. Southern Company Series | Southern vs. ATT Inc | Southern vs. Aegon Funding |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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