Correlation Between CenterPoint Energy and Southern
Can any of the company-specific risk be diversified away by investing in both CenterPoint Energy 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 CenterPoint Energy and Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CenterPoint Energy and Southern Company, you can compare the effects of market volatilities on CenterPoint Energy 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 CenterPoint Energy with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and Southern.
Diversification Opportunities for CenterPoint Energy and Southern
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CenterPoint and Southern is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy i.e., CenterPoint Energy and Southern go up and down completely randomly.
Pair Corralation between CenterPoint Energy and Southern
Considering the 90-day investment horizon CenterPoint Energy is expected to generate 2.71 times less return on investment than Southern. In addition to that, CenterPoint Energy is 1.11 times more volatile than Southern Company. It trades about 0.02 of its total potential returns per unit of risk. Southern Company is currently generating about 0.06 per unit of volatility. If you would invest 6,345 in Southern Company on August 27, 2024 and sell it today you would earn a total of 2,415 from holding Southern Company or generate 38.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CenterPoint Energy vs. Southern Company
Performance |
| Timeline |
| CenterPoint Energy |
| Southern |
CenterPoint Energy and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CenterPoint Energy and Southern
The main advantage of trading using opposite CenterPoint Energy and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy 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.| CenterPoint Energy vs. Entergy | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Pinnacle West Capital |
| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
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.
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