Correlation Between Portland General and Southern
Can any of the company-specific risk be diversified away by investing in both Portland General 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 Portland General and Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Portland General Electric and Southern Company, you can compare the effects of market volatilities on Portland General 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 Portland General with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Portland General and Southern.
Diversification Opportunities for Portland General and Southern
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Portland and Southern is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Portland General Electric and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and Portland General 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 Portland General Electric 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 Portland General i.e., Portland General and Southern go up and down completely randomly.
Pair Corralation between Portland General and Southern
Considering the 90-day investment horizon Portland General is expected to generate 1.93 times less return on investment than Southern. In addition to that, Portland General is 1.08 times more volatile than Southern Company. It trades about 0.04 of its total potential returns per unit of risk. Southern Company is currently generating about 0.08 per unit of volatility. If you would invest 6,889 in Southern Company on September 12, 2024 and sell it today you would earn a total of 1,444 from holding Southern Company or generate 20.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Portland General Electric vs. Southern Company
Performance |
| Timeline |
| Portland General Electric |
| Southern |
Portland General and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Portland General and Southern
The main advantage of trading using opposite Portland General and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Portland General 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.| Portland General vs. Southern Company | Portland General vs. Consolidated Edison | Portland General vs. Edison International |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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