Correlation Between Southern and MGE Energy
Can any of the company-specific risk be diversified away by investing in both Southern and MGE 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 MGE 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 MGE Energy, you can compare the effects of market volatilities on Southern and MGE 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 MGE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and MGE Energy.
Diversification Opportunities for Southern and MGE Energy
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Southern and MGE is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and MGE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGE 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 MGE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGE Energy has no effect on the direction of Southern i.e., Southern and MGE Energy go up and down completely randomly.
Pair Corralation between Southern and MGE Energy
Allowing for the 90-day total investment horizon Southern Company is expected to under-perform the MGE Energy. But the stock apears to be less risky and, when comparing its historical volatility, Southern Company is 2.17 times less risky than MGE Energy. The stock trades about -0.05 of its potential returns per unit of risk. The MGE Energy is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 9,010 in MGE Energy on September 1, 2024 and sell it today you would earn a total of 1,418 from holding MGE Energy or generate 15.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company vs. MGE Energy
Performance |
| Timeline |
| Southern |
| MGE Energy |
Southern and MGE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and MGE Energy
The main advantage of trading using opposite Southern and MGE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, MGE 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 MGE Energy will offset losses from the drop in MGE Energy's long position.| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
| MGE Energy vs. CMS Energy | MGE Energy vs. Ameren Corp | MGE Energy vs. Pinnacle West Capital | MGE Energy vs. Evergy, |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |