Correlation Between Southern and Utilities Fund
Can any of the company-specific risk be diversified away by investing in both Southern and Utilities Fund 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 Utilities Fund into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company and Utilities Fund Class, you can compare the effects of market volatilities on Southern and Utilities Fund 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 Utilities Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Utilities Fund.
Diversification Opportunities for Southern and Utilities Fund
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southern and Utilities is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and Utilities Fund Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Fund Class 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 Utilities Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Fund Class has no effect on the direction of Southern i.e., Southern and Utilities Fund go up and down completely randomly.
Pair Corralation between Southern and Utilities Fund
Allowing for the 90-day total investment horizon Southern Company is expected to generate 1.17 times more return on investment than Utilities Fund. However, Southern is 1.17 times more volatile than Utilities Fund Class. It trades about 0.07 of its potential returns per unit of risk. Utilities Fund Class is currently generating about 0.06 per unit of risk. If you would invest 7,931 in Southern Company on January 14, 2025 and sell it today you would earn a total of 1,185 from holding Southern Company or generate 14.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Southern Company vs. Utilities Fund Class
Performance |
| Timeline |
| Southern |
| Utilities Fund Class |
Southern and Utilities Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Utilities Fund
The main advantage of trading using opposite Southern and Utilities Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Utilities Fund 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 Utilities Fund will offset losses from the drop in Utilities Fund's long position.| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
| Utilities Fund vs. Dominion Energy | Utilities Fund vs. Consolidated Edison | Utilities Fund vs. Eversource Energy | Utilities Fund vs. FirstEnergy |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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