Correlation Between Southern Company and United States
Can any of the company-specific risk be diversified away by investing in both Southern Company 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 Company 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 Company Series and United States Cellular, you can compare the effects of market volatilities on Southern Company 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 Company with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Company and United States.
Diversification Opportunities for Southern Company 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 Company Series 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 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 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 Company i.e., Southern Company and United States go up and down completely randomly.
Pair Corralation between Southern Company and United States
Given the investment horizon of 90 days Southern Company Series is expected to under-perform the United States. But the stock apears to be less risky and, when comparing its historical volatility, Southern Company Series is 1.68 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 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,912 in United States Cellular on November 3, 2024 and sell it today you would earn a total of 476.00 from holding United States Cellular or generate 24.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Southern Company Series vs. United States Cellular
Performance |
| Timeline |
| Southern Company |
| United States Cellular |
Southern Company and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Company and United States
The main advantage of trading using opposite Southern Company and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Company 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 Company vs. Southern Co | Southern Company vs. DTE Energy | Southern Company vs. Southern Co | Southern Company vs. Prudential Financial 4125 |
| United States vs. United States Cellular | United States vs. United States Cellular | United States vs. Office Properties Income | United States vs. DBA Sempra 5750 |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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