Correlation Between Southern Company and Office Properties
Can any of the company-specific risk be diversified away by investing in both Southern Company and Office Properties 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 Company and Office Properties into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company Series and Office Properties Income, you can compare the effects of market volatilities on Southern Company and Office Properties 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 Company with a short position of Office Properties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Company and Office Properties.
Diversification Opportunities for Southern Company and Office Properties
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southern and Office is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company Series and Office Properties Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Office Properties Income and Southern Company 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 Company Series are associated (or correlated) with Office Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Office Properties Income has no effect on the direction of Southern Company i.e., Southern Company and Office Properties go up and down completely randomly.
Pair Corralation between Southern Company and Office Properties
Given the investment horizon of 90 days Southern Company Series is expected to under-perform the Office Properties. But the stock apears to be less risky and, when comparing its historical volatility, Southern Company Series is 4.41 times less risky than Office Properties. The stock trades about -0.06 of its potential returns per unit of risk. The Office Properties Income is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,189 in Office Properties Income on August 28, 2024 and sell it today you would earn a total of 56.00 from holding Office Properties Income or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company Series vs. Office Properties Income
Performance |
| Timeline |
| Southern Company |
| Office Properties Income |
Southern Company and Office Properties Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Company and Office Properties
The main advantage of trading using opposite Southern Company and Office Properties positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Company position performs unexpectedly, Office Properties 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 Office Properties will offset losses from the drop in Office Properties' long position.| Southern Company vs. Southern Co | Southern Company vs. DTE Energy | Southern Company vs. Southern Co | Southern Company vs. Prudential Financial 4125 |
| Office Properties vs. Realty Income | Office Properties vs. First Industrial Realty | Office Properties vs. Healthcare Realty Trust | Office Properties vs. Park Hotels Resorts |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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