Correlation Between Southern and Engie Brasil
Can any of the company-specific risk be diversified away by investing in both Southern and Engie Brasil 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 Engie Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company and Engie Brasil Energia, you can compare the effects of market volatilities on Southern and Engie Brasil 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 Engie Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Engie Brasil.
Diversification Opportunities for Southern and Engie Brasil
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southern and Engie is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and Engie Brasil Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie Brasil Energia 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 Engie Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie Brasil Energia has no effect on the direction of Southern i.e., Southern and Engie Brasil go up and down completely randomly.
Pair Corralation between Southern and Engie Brasil
Allowing for the 90-day total investment horizon Southern Company is expected to under-perform the Engie Brasil. But the stock apears to be less risky and, when comparing its historical volatility, Southern Company is 1.69 times less risky than Engie Brasil. The stock trades about -0.01 of its potential returns per unit of risk. The Engie Brasil Energia is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 581.00 in Engie Brasil Energia on October 26, 2024 and sell it today you would earn a total of 21.00 from holding Engie Brasil Energia or generate 3.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company vs. Engie Brasil Energia
Performance |
| Timeline |
| Southern |
| Engie Brasil Energia |
Southern and Engie Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Engie Brasil
The main advantage of trading using opposite Southern and Engie Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Engie Brasil 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 Engie Brasil will offset losses from the drop in Engie Brasil's long position.| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
| Engie Brasil vs. Red Electrica Corporacion | Engie Brasil vs. Centrais Eltricas Brasileiras | Engie Brasil vs. Centrais Electricas Brasileiras | Engie Brasil vs. Enel Chile SA |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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