Correlation Between Southern and Power Assets
Can any of the company-specific risk be diversified away by investing in both Southern and Power Assets 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 Power Assets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Co and Power Assets Holdings, you can compare the effects of market volatilities on Southern and Power Assets 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 Power Assets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Power Assets.
Diversification Opportunities for Southern and Power Assets
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Southern and Power is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and Power Assets Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Power Assets Holdings 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 Co are associated (or correlated) with Power Assets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Power Assets Holdings has no effect on the direction of Southern i.e., Southern and Power Assets go up and down completely randomly.
Pair Corralation between Southern and Power Assets
Given the investment horizon of 90 days Southern Co is expected to generate 0.63 times more return on investment than Power Assets. However, Southern Co is 1.58 times less risky than Power Assets. It trades about -0.06 of its potential returns per unit of risk. Power Assets Holdings is currently generating about -0.1 per unit of risk. If you would invest 2,424 in Southern Co on August 27, 2024 and sell it today you would lose (22.00) from holding Southern Co or give up 0.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Co vs. Power Assets Holdings
Performance |
| Timeline |
| Southern |
| Power Assets Holdings |
Southern and Power Assets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Power Assets
The main advantage of trading using opposite Southern and Power Assets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Power Assets 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 Power Assets will offset losses from the drop in Power Assets' long position.| Southern vs. AKITA Drilling | Southern vs. Transocean | Southern vs. Universal Technical Institute | Southern vs. AMREP |
| Power Assets vs. TransAlta Corp | Power Assets vs. Pampa Energia SA | Power Assets vs. Vistra Energy Corp | Power Assets vs. NRG 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals |