Correlation Between Southern and Ameren Corp
Can any of the company-specific risk be diversified away by investing in both Southern and Ameren Corp 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 Southern and Ameren Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company and Ameren Corp, you can compare the effects of market volatilities on Southern and Ameren Corp 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 Southern with a short position of Ameren Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Ameren Corp.
Diversification Opportunities for Southern and Ameren Corp
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Southern and Ameren is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and Ameren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Corp and Southern 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 Southern Company are associated (or correlated) with Ameren Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Corp has no effect on the direction of Southern i.e., Southern and Ameren Corp go up and down completely randomly.
Pair Corralation between Southern and Ameren Corp
Allowing for the 90-day total investment horizon Southern is expected to generate 2.12 times less return on investment than Ameren Corp. In addition to that, Southern is 1.29 times more volatile than Ameren Corp. It trades about 0.11 of its total potential returns per unit of risk. Ameren Corp is currently generating about 0.31 per unit of volatility. If you would invest 8,687 in Ameren Corp on November 5, 2024 and sell it today you would earn a total of 733.00 from holding Ameren Corp or generate 8.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company vs. Ameren Corp
Performance |
| Timeline |
| Southern |
| Ameren Corp |
Southern and Ameren Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Ameren Corp
The main advantage of trading using opposite Southern and Ameren Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Ameren Corp 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 Ameren Corp will offset losses from the drop in Ameren Corp's long position.| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
| Ameren Corp vs. CMS Energy | Ameren Corp vs. Pinnacle West Capital | Ameren Corp vs. MGE Energy | Ameren Corp vs. Evergy, |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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