Correlation Between Southern and Portland General
Can any of the company-specific risk be diversified away by investing in both Southern and Portland General 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 Portland General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company and Portland General Electric, you can compare the effects of market volatilities on Southern and Portland General 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 Portland General. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Portland General.
Diversification Opportunities for Southern and Portland General
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southern and Portland is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and Portland General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portland General Electric 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 Portland General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portland General Electric has no effect on the direction of Southern i.e., Southern and Portland General go up and down completely randomly.
Pair Corralation between Southern and Portland General
Allowing for the 90-day total investment horizon Southern Company is expected to generate 0.89 times more return on investment than Portland General. However, Southern Company is 1.13 times less risky than Portland General. It trades about 0.08 of its potential returns per unit of risk. Portland General Electric is currently generating about 0.03 per unit of risk. If you would invest 6,456 in Southern Company on September 12, 2024 and sell it today you would earn a total of 1,876 from holding Southern Company or generate 29.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company vs. Portland General Electric
Performance |
| Timeline |
| Southern |
| Portland General Electric |
Southern and Portland General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Portland General
The main advantage of trading using opposite Southern and Portland General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Portland General 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 Portland General will offset losses from the drop in Portland General's long position.| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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