Correlation Between Southern and Alliant Energy
Can any of the company-specific risk be diversified away by investing in both Southern and Alliant 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 Alliant 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 Alliant Energy Corp, you can compare the effects of market volatilities on Southern and Alliant 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 Alliant Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Alliant Energy.
Diversification Opportunities for Southern and Alliant Energy
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southern and Alliant is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and Alliant Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliant Energy 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 Alliant Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliant Energy Corp has no effect on the direction of Southern i.e., Southern and Alliant Energy go up and down completely randomly.
Pair Corralation between Southern and Alliant Energy
Allowing for the 90-day total investment horizon Southern is expected to generate 1.01 times less return on investment than Alliant Energy. In addition to that, Southern is 1.46 times more volatile than Alliant Energy Corp. It trades about 0.07 of its total potential returns per unit of risk. Alliant Energy Corp is currently generating about 0.1 per unit of volatility. If you would invest 6,003 in Alliant Energy Corp on November 18, 2024 and sell it today you would earn a total of 130.00 from holding Alliant Energy Corp or generate 2.17% 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. Alliant Energy Corp
Performance |
| Timeline |
| Southern |
| Alliant Energy Corp |
Southern and Alliant Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Alliant Energy
The main advantage of trading using opposite Southern and Alliant Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Alliant 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 Alliant Energy will offset losses from the drop in Alliant Energy's long position.| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
| Alliant Energy vs. CMS Energy | Alliant Energy vs. Ameren Corp | Alliant Energy vs. Pinnacle West Capital | Alliant Energy vs. MGE 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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