Correlation Between Office Properties and Southern Company
Can any of the company-specific risk be diversified away by investing in both Office Properties 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 Office Properties and Southern Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Office Properties Income and Southern Company Series, you can compare the effects of market volatilities on Office Properties 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 Office Properties with a short position of Southern Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Office Properties and Southern Company.
Diversification Opportunities for Office Properties and Southern Company
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Office and Southern is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Office Properties Income and Southern Company Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Company and Office Properties 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 Office Properties Income 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 Office Properties i.e., Office Properties and Southern Company go up and down completely randomly.
Pair Corralation between Office Properties and Southern Company
Assuming the 90 days horizon Office Properties Income is expected to generate 4.41 times more return on investment than Southern Company. However, Office Properties is 4.41 times more volatile than Southern Company Series. It trades about 0.04 of its potential returns per unit of risk. Southern Company Series is currently generating about -0.06 per unit of risk. If you would invest 1,189 in Office Properties Income on August 28, 2024 and sell it today you would earn a total of 56.00 from holding Office Properties Income or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Office Properties Income vs. Southern Company Series
Performance |
| Timeline |
| Office Properties Income |
| Southern Company |
Office Properties and Southern Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Office Properties and Southern Company
The main advantage of trading using opposite Office Properties and Southern Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Office Properties 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.| Office Properties vs. Realty Income | Office Properties vs. First Industrial Realty | Office Properties vs. Healthcare Realty Trust | Office Properties vs. Park Hotels Resorts |
| 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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