Correlation Between Southern and Duke Energy
Can any of the company-specific risk be diversified away by investing in both Southern and Duke Energy 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 Duke Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company and Duke Energy, you can compare the effects of market volatilities on Southern and Duke Energy 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 Duke Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Duke Energy.
Diversification Opportunities for Southern and Duke Energy
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southern and Duke is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy 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 Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of Southern i.e., Southern and Duke Energy go up and down completely randomly.
Pair Corralation between Southern and Duke Energy
Allowing for the 90-day total investment horizon Southern Company is expected to generate 2.31 times more return on investment than Duke Energy. However, Southern is 2.31 times more volatile than Duke Energy. It trades about 0.08 of its potential returns per unit of risk. Duke Energy is currently generating about 0.05 per unit of risk. If you would invest 6,782 in Southern Company on November 9, 2024 and sell it today you would earn a total of 1,597 from holding Southern Company or generate 23.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company vs. Duke Energy
Performance |
| Timeline |
| Southern |
| Duke Energy |
Southern and Duke Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Duke Energy
The main advantage of trading using opposite Southern and Duke Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Duke Energy 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 Duke Energy will offset losses from the drop in Duke Energy's long position.| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
| Duke Energy vs. Centrais Eltricas Brasileiras | Duke Energy vs. Nextera Energy | Duke Energy vs. Consumers Energy | Duke Energy vs. CMS Energy |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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