Correlation Between Southern Energy and WesCan Energy
Can any of the company-specific risk be diversified away by investing in both Southern Energy and WesCan Energy 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 Energy and WesCan Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Energy Corp and WesCan Energy Corp, you can compare the effects of market volatilities on Southern Energy and WesCan Energy 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 Energy with a short position of WesCan Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Energy and WesCan Energy.
Diversification Opportunities for Southern Energy and WesCan Energy
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Southern and WesCan is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Southern Energy Corp and WesCan Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WesCan Energy Corp and Southern Energy 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 Energy Corp are associated (or correlated) with WesCan Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WesCan Energy Corp has no effect on the direction of Southern Energy i.e., Southern Energy and WesCan Energy go up and down completely randomly.
Pair Corralation between Southern Energy and WesCan Energy
Assuming the 90 days horizon Southern Energy Corp is expected to under-perform the WesCan Energy. In addition to that, Southern Energy is 1.42 times more volatile than WesCan Energy Corp. It trades about -0.05 of its total potential returns per unit of risk. WesCan Energy Corp is currently generating about 0.03 per unit of volatility. If you would invest 9.00 in WesCan Energy Corp on September 3, 2024 and sell it today you would earn a total of 0.00 from holding WesCan Energy Corp or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Southern Energy Corp vs. WesCan Energy Corp
Performance |
| Timeline |
| Southern Energy Corp |
| WesCan Energy Corp |
Southern Energy and WesCan Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Energy and WesCan Energy
The main advantage of trading using opposite Southern Energy and WesCan Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Energy position performs unexpectedly, WesCan Energy 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 WesCan Energy will offset losses from the drop in WesCan Energy's long position.| Southern Energy vs. Prospera Energy | Southern Energy vs. Pine Cliff Energy | Southern Energy vs. Lucero Energy Corp | Southern Energy vs. Pieridae Energy |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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