Correlation Between Southern and Prudential Financial
Can any of the company-specific risk be diversified away by investing in both Southern and Prudential Financial 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 Prudential Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Co and Prudential Financial 4125, you can compare the effects of market volatilities on Southern and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Prudential Financial.
Diversification Opportunities for Southern and Prudential Financial
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Southern and Prudential is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and Prudential Financial 4125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 4125 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial 4125 has no effect on the direction of Southern i.e., Southern and Prudential Financial go up and down completely randomly.
Pair Corralation between Southern and Prudential Financial
Given the investment horizon of 90 days Southern Co is expected to generate 0.68 times more return on investment than Prudential Financial. However, Southern Co is 1.48 times less risky than Prudential Financial. It trades about 0.17 of its potential returns per unit of risk. Prudential Financial 4125 is currently generating about 0.09 per unit of risk. If you would invest 2,218 in Southern Co on October 24, 2024 and sell it today you would earn a total of 68.00 from holding Southern Co or generate 3.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 94.74% |
| Values | Daily Returns |
Southern Co vs. Prudential Financial 4125
Performance |
| Timeline |
| Southern |
| Prudential Financial 4125 |
Southern and Prudential Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Prudential Financial
The main advantage of trading using opposite Southern and Prudential Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Prudential Financial 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 Prudential Financial will offset losses from the drop in Prudential Financial's long position.| Southern vs. Consumers Energy | Southern vs. CMS Energy | Southern vs. Cadiz Depositary Shares | Southern vs. DTE Energy |
| Prudential Financial vs. Southern Company Series | Prudential Financial vs. Credit Enhanced Corts | Prudential Financial vs. Structured Products Corp | Prudential Financial vs. Affiliated Managers Group |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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