Correlation Between Southern and Aberdeen Standard
Can any of the company-specific risk be diversified away by investing in both Southern and Aberdeen Standard 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 Aberdeen Standard into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company and Aberdeen Standard Global, you can compare the effects of market volatilities on Southern and Aberdeen Standard 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 Aberdeen Standard. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Aberdeen Standard.
Diversification Opportunities for Southern and Aberdeen Standard
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southern and Aberdeen is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and Aberdeen Standard Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aberdeen Standard Global 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 Aberdeen Standard. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aberdeen Standard Global has no effect on the direction of Southern i.e., Southern and Aberdeen Standard go up and down completely randomly.
Pair Corralation between Southern and Aberdeen Standard
Allowing for the 90-day total investment horizon Southern Company is expected to under-perform the Aberdeen Standard. In addition to that, Southern is 1.26 times more volatile than Aberdeen Standard Global. It trades about -0.11 of its total potential returns per unit of risk. Aberdeen Standard Global is currently generating about -0.11 per unit of volatility. If you would invest 2,008 in Aberdeen Standard Global on August 28, 2024 and sell it today you would lose (43.00) from holding Aberdeen Standard Global or give up 2.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company vs. Aberdeen Standard Global
Performance |
| Timeline |
| Southern |
| Aberdeen Standard Global |
Southern and Aberdeen Standard Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Aberdeen Standard
The main advantage of trading using opposite Southern and Aberdeen Standard positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Aberdeen Standard 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 Aberdeen Standard will offset losses from the drop in Aberdeen Standard's long position.| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
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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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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