Correlation Between Southern and New Fortress
Can any of the company-specific risk be diversified away by investing in both Southern and New Fortress 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 New Fortress into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company and New Fortress Energy, you can compare the effects of market volatilities on Southern and New Fortress 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 New Fortress. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and New Fortress.
Diversification Opportunities for Southern and New Fortress
-0.79 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southern and New is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and New Fortress Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Fortress 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 New Fortress. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Fortress Energy has no effect on the direction of Southern i.e., Southern and New Fortress go up and down completely randomly.
Pair Corralation between Southern and New Fortress
Allowing for the 90-day total investment horizon Southern Company is expected to under-perform the New Fortress. But the stock apears to be less risky and, when comparing its historical volatility, Southern Company is 3.66 times less risky than New Fortress. The stock trades about -0.04 of its potential returns per unit of risk. The New Fortress Energy is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 800.00 in New Fortress Energy on November 1, 2024 and sell it today you would earn a total of 757.00 from holding New Fortress Energy or generate 94.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company vs. New Fortress Energy
Performance |
| Timeline |
| Southern |
| New Fortress Energy |
Southern and New Fortress Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and New Fortress
The main advantage of trading using opposite Southern and New Fortress positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, New Fortress 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 New Fortress will offset losses from the drop in New Fortress' long position.| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
| New Fortress vs. FLEX LNG | New Fortress vs. Coterra Energy | New Fortress vs. Golar LNG Limited | New Fortress vs. Excelerate 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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