Correlation Between Southern and United States
Can any of the company-specific risk be diversified away by investing in both Southern and United States 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 United States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Co and United States Cellular, you can compare the effects of market volatilities on Southern and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and United States.
Diversification Opportunities for Southern and United States
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Southern and United is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and United States Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Cellular 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Cellular has no effect on the direction of Southern i.e., Southern and United States go up and down completely randomly.
Pair Corralation between Southern and United States
Given the investment horizon of 90 days Southern Co is expected to under-perform the United States. But the stock apears to be less risky and, when comparing its historical volatility, Southern Co is 1.77 times less risky than United States. The stock trades about -0.02 of its potential returns per unit of risk. The United States Cellular is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,703 in United States Cellular on November 4, 2024 and sell it today you would earn a total of 512.00 from holding United States Cellular or generate 30.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Co vs. United States Cellular
Performance |
| Timeline |
| Southern |
| United States Cellular |
Southern and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and United States
The main advantage of trading using opposite Southern and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.| Southern vs. Southern Co | Southern vs. Southern Company Series | Southern vs. ATT Inc | Southern vs. Aegon Funding |
| United States vs. United States Cellular | United States vs. United States Cellular | United States vs. Office Properties Income | United States vs. Southern Company Series |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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