Correlation Between Southern and Spirit Of
Can any of the company-specific risk be diversified away by investing in both Southern and Spirit Of 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 Spirit Of into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company and Spirit Of America, you can compare the effects of market volatilities on Southern and Spirit Of 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 Spirit Of. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Spirit Of.
Diversification Opportunities for Southern and Spirit Of
Very weak diversification
The 3 months correlation between Southern and Spirit is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and Spirit Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Of America 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 Spirit Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirit Of America has no effect on the direction of Southern i.e., Southern and Spirit Of go up and down completely randomly.
Pair Corralation between Southern and Spirit Of
Allowing for the 90-day total investment horizon Southern is expected to generate 4.06 times less return on investment than Spirit Of. In addition to that, Southern is 1.12 times more volatile than Spirit Of America. It trades about 0.06 of its total potential returns per unit of risk. Spirit Of America is currently generating about 0.26 per unit of volatility. If you would invest 2,086 in Spirit Of America on August 31, 2024 and sell it today you would earn a total of 117.00 from holding Spirit Of America or generate 5.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company vs. Spirit Of America
Performance |
| Timeline |
| Southern |
| Spirit Of America |
Southern and Spirit Of Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Spirit Of
The main advantage of trading using opposite Southern and Spirit Of positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Spirit Of 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 Spirit Of will offset losses from the drop in Spirit Of's long position.| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
| Spirit Of vs. Franklin Utilities Fund | Spirit Of vs. Franklin Utilities Fund | Spirit Of vs. Franklin Utilities | Spirit Of vs. Franklin Utilities Fund |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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