Correlation Between Southern and Old Republic
Can any of the company-specific risk be diversified away by investing in both Southern and Old Republic 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 Old Republic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Co and Old Republic International, you can compare the effects of market volatilities on Southern and Old Republic 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 Old Republic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Old Republic.
Diversification Opportunities for Southern and Old Republic
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Southern and Old is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and Old Republic International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Republic Interna 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 Old Republic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Republic Interna has no effect on the direction of Southern i.e., Southern and Old Republic go up and down completely randomly.
Pair Corralation between Southern and Old Republic
Given the investment horizon of 90 days Southern Co is expected to under-perform the Old Republic. But the preferred stock apears to be less risky and, when comparing its historical volatility, Southern Co is 1.96 times less risky than Old Republic. The preferred stock trades about -0.41 of its potential returns per unit of risk. The Old Republic International is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest 3,683 in Old Republic International on September 12, 2024 and sell it today you would lose (85.00) from holding Old Republic International or give up 2.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Co vs. Old Republic International
Performance |
| Timeline |
| Southern |
| Old Republic Interna |
Southern and Old Republic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Old Republic
The main advantage of trading using opposite Southern and Old Republic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Old Republic 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 Old Republic will offset losses from the drop in Old Republic's long position.| Southern vs. Old Republic International | Southern vs. Cincinnati Financial | Southern vs. QBE Insurance Group | Southern vs. Sphere Entertainment Co |
| Old Republic vs. Axa Equitable Holdings | Old Republic vs. American International Group | Old Republic vs. Arch Capital Group | Old Republic vs. Sun Life Financial |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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