Correlation Between Southern and Spire
Can any of the company-specific risk be diversified away by investing in both Southern and Spire 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 Spire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company and Spire Inc, you can compare the effects of market volatilities on Southern and Spire 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 Spire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Spire.
Diversification Opportunities for Southern and Spire
Average diversification
The 3 months correlation between Southern and Spire is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and Spire Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Inc 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 Spire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Inc has no effect on the direction of Southern i.e., Southern and Spire go up and down completely randomly.
Pair Corralation between Southern and Spire
Allowing for the 90-day total investment horizon Southern Company is expected to generate 0.87 times more return on investment than Spire. However, Southern Company is 1.14 times less risky than Spire. It trades about 0.1 of its potential returns per unit of risk. Spire Inc is currently generating about 0.08 per unit of risk. If you would invest 6,846 in Southern Company on August 26, 2024 and sell it today you would earn a total of 1,914 from holding Southern Company or generate 27.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company vs. Spire Inc
Performance |
| Timeline |
| Southern |
| Spire Inc |
Southern and Spire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Spire
The main advantage of trading using opposite Southern and Spire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Spire 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 Spire will offset losses from the drop in Spire'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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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