Correlation Between Southern and ATT
Can any of the company-specific risk be diversified away by investing in both Southern and ATT 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 ATT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Co and ATT Inc ELKS, you can compare the effects of market volatilities on Southern and ATT 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 ATT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and ATT.
Diversification Opportunities for Southern and ATT
Modest diversification
The 3 months correlation between Southern and ATT is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and ATT Inc ELKS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATT Inc ELKS 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 ATT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATT Inc ELKS has no effect on the direction of Southern i.e., Southern and ATT go up and down completely randomly.
Pair Corralation between Southern and ATT
Given the investment horizon of 90 days Southern Co is expected to under-perform the ATT. In addition to that, Southern is 1.04 times more volatile than ATT Inc ELKS. It trades about -0.12 of its total potential returns per unit of risk. ATT Inc ELKS is currently generating about 0.03 per unit of volatility. If you would invest 2,497 in ATT Inc ELKS on August 28, 2024 and sell it today you would earn a total of 12.00 from holding ATT Inc ELKS or generate 0.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Co vs. ATT Inc ELKS
Performance |
| Timeline |
| Southern |
| ATT Inc ELKS |
Southern and ATT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and ATT
The main advantage of trading using opposite Southern and ATT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, ATT 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 ATT will offset losses from the drop in ATT's long position.| Southern vs. Southern Co | Southern vs. Southern Company Series | Southern vs. ATT Inc | Southern vs. Aegon Funding |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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