Correlation Between Southern and Artesian Resources
Can any of the company-specific risk be diversified away by investing in both Southern and Artesian Resources 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 Artesian Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company and Artesian Resources, you can compare the effects of market volatilities on Southern and Artesian Resources 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 Artesian Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Artesian Resources.
Diversification Opportunities for Southern and Artesian Resources
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southern and Artesian is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and Artesian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artesian Resources 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 Artesian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artesian Resources has no effect on the direction of Southern i.e., Southern and Artesian Resources go up and down completely randomly.
Pair Corralation between Southern and Artesian Resources
Allowing for the 90-day total investment horizon Southern Company is expected to generate 1.03 times more return on investment than Artesian Resources. However, Southern is 1.03 times more volatile than Artesian Resources. It trades about 0.07 of its potential returns per unit of risk. Artesian Resources is currently generating about -0.02 per unit of risk. If you would invest 8,207 in Southern Company on November 3, 2024 and sell it today you would earn a total of 188.00 from holding Southern Company or generate 2.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company vs. Artesian Resources
Performance |
| Timeline |
| Southern |
| Artesian Resources |
Southern and Artesian Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Artesian Resources
The main advantage of trading using opposite Southern and Artesian Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Artesian Resources 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 Artesian Resources will offset losses from the drop in Artesian Resources' long position.| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
| Artesian Resources vs. California Water Service | Artesian Resources vs. SJW Group Common | Artesian Resources vs. The York Water | Artesian Resources vs. American States Water |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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