Correlation Between National Rural and Southern
Can any of the company-specific risk be diversified away by investing in both National Rural 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 National Rural and Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Rural Utilities and Southern Co, you can compare the effects of market volatilities on National Rural 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 National Rural with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Rural and Southern.
Diversification Opportunities for National Rural and Southern
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between National and Southern is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding National Rural Utilities and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and National Rural 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 National Rural Utilities 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 National Rural i.e., National Rural and Southern go up and down completely randomly.
Pair Corralation between National Rural and Southern
Given the investment horizon of 90 days National Rural Utilities is expected to generate 0.83 times more return on investment than Southern. However, National Rural Utilities is 1.21 times less risky than Southern. It trades about -0.16 of its potential returns per unit of risk. Southern Co is currently generating about -0.15 per unit of risk. If you would invest 2,462 in National Rural Utilities on August 31, 2024 and sell it today you would lose (55.00) from holding National Rural Utilities or give up 2.23% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Rural Utilities vs. Southern Co
Performance |
| Timeline |
| National Rural Utilities |
| Southern |
National Rural and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Rural and Southern
The main advantage of trading using opposite National Rural and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Rural 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.| National Rural vs. HUMANA INC | National Rural vs. SCOR PK | National Rural vs. Aquagold International | National Rural vs. Thrivent High Yield |
| Southern vs. NL Industries | Southern vs. Origin Materials | Southern vs. CF Industries Holdings | Southern vs. Hudson Technologies |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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