Correlation Between Southern Company and PGE Corp
Can any of the company-specific risk be diversified away by investing in both Southern Company and PGE Corp 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 PGE Corp 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 PGE Corp, you can compare the effects of market volatilities on Southern Company and PGE Corp 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 PGE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Company and PGE Corp.
Diversification Opportunities for Southern Company and PGE Corp
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Southern and PGE is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company Series and PGE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE Corp 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 PGE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corp has no effect on the direction of Southern Company i.e., Southern Company and PGE Corp go up and down completely randomly.
Pair Corralation between Southern Company and PGE Corp
Given the investment horizon of 90 days Southern Company is expected to generate 18.05 times less return on investment than PGE Corp. But when comparing it to its historical volatility, Southern Company Series is 1.58 times less risky than PGE Corp. It trades about 0.01 of its potential returns per unit of risk. PGE Corp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 14,732 in PGE Corp on August 31, 2024 and sell it today you would earn a total of 952.00 from holding PGE Corp or generate 6.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 8.58% |
| Values | Daily Returns |
Southern Company Series vs. PGE Corp
Performance |
| Timeline |
| Southern Company |
| PGE Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Southern Company and PGE Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Company and PGE Corp
The main advantage of trading using opposite Southern Company and PGE Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Company position performs unexpectedly, PGE Corp 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 PGE Corp will offset losses from the drop in PGE Corp's long position.| Southern Company vs. Southern Co | Southern Company vs. DTE Energy | Southern Company vs. Southern Co | Southern Company vs. Prudential Financial 4125 |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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