Correlation Between Enterprise Products and Southern Company
Can any of the company-specific risk be diversified away by investing in both Enterprise Products and Southern Company 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 Enterprise Products and Southern Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enterprise Products Partners and Southern Company Series, you can compare the effects of market volatilities on Enterprise Products and Southern Company 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 Enterprise Products with a short position of Southern Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Products and Southern Company.
Diversification Opportunities for Enterprise Products and Southern Company
-0.74 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Enterprise and Southern is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Products Partners and Southern Company Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Company and Enterprise Products 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 Enterprise Products Partners are associated (or correlated) with Southern Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Company has no effect on the direction of Enterprise Products i.e., Enterprise Products and Southern Company go up and down completely randomly.
Pair Corralation between Enterprise Products and Southern Company
Considering the 90-day investment horizon Enterprise Products Partners is expected to generate 0.91 times more return on investment than Southern Company. However, Enterprise Products Partners is 1.1 times less risky than Southern Company. It trades about 0.79 of its potential returns per unit of risk. Southern Company Series is currently generating about -0.23 per unit of risk. If you would invest 2,874 in Enterprise Products Partners on August 31, 2024 and sell it today you would earn a total of 491.00 from holding Enterprise Products Partners or generate 17.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enterprise Products Partners vs. Southern Company Series
Performance |
| Timeline |
| Enterprise Products |
| Southern Company |
Enterprise Products and Southern Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Products and Southern Company
The main advantage of trading using opposite Enterprise Products and Southern Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Products position performs unexpectedly, Southern Company 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 Company will offset losses from the drop in Southern Company's long position.| Enterprise Products vs. MPLX LP | Enterprise Products vs. Kinder Morgan | Enterprise Products vs. ONEOK Inc | Enterprise Products vs. Energy Transfer LP |
| Southern Company vs. Southern Co | Southern Company vs. DTE Energy | Southern Company vs. Southern Co | Southern Company vs. Prudential Financial 4125 |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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