Correlation Between Southern Company and DBA Sempra
Can any of the company-specific risk be diversified away by investing in both Southern Company and DBA Sempra 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 DBA Sempra 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 DBA Sempra 5750, you can compare the effects of market volatilities on Southern Company and DBA Sempra 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 DBA Sempra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Company and DBA Sempra.
Diversification Opportunities for Southern Company and DBA Sempra
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southern and DBA is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company Series and DBA Sempra 5750 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DBA Sempra 5750 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 DBA Sempra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DBA Sempra 5750 has no effect on the direction of Southern Company i.e., Southern Company and DBA Sempra go up and down completely randomly.
Pair Corralation between Southern Company and DBA Sempra
Given the investment horizon of 90 days Southern Company Series is expected to under-perform the DBA Sempra. In addition to that, Southern Company is 1.24 times more volatile than DBA Sempra 5750. It trades about -0.02 of its total potential returns per unit of risk. DBA Sempra 5750 is currently generating about 0.01 per unit of volatility. If you would invest 2,309 in DBA Sempra 5750 on November 3, 2024 and sell it today you would earn a total of 37.00 from holding DBA Sempra 5750 or generate 1.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company Series vs. DBA Sempra 5750
Performance |
| Timeline |
| Southern Company |
| DBA Sempra 5750 |
Southern Company and DBA Sempra Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Company and DBA Sempra
The main advantage of trading using opposite Southern Company and DBA Sempra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Company position performs unexpectedly, DBA Sempra 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 DBA Sempra will offset losses from the drop in DBA Sempra's long position.| Southern Company vs. Southern Co | Southern Company vs. DTE Energy | Southern Company vs. Southern Co | Southern Company vs. Prudential Financial 4125 |
| DBA Sempra vs. Southern Co | DBA Sempra vs. CMS Energy Corp | DBA Sempra vs. Affiliated Managers Group | DBA Sempra vs. Southern Co |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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