Correlation Between Union Electric and Southern California
Can any of the company-specific risk be diversified away by investing in both Union Electric and Southern California 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 Union Electric and Southern California into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Union Electric and Southern California Gas, you can compare the effects of market volatilities on Union Electric and Southern California 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 Union Electric with a short position of Southern California. Check out your portfolio center. Please also check ongoing floating volatility patterns of Union Electric and Southern California.
Diversification Opportunities for Union Electric and Southern California
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Union and Southern is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Union Electric and Southern California Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern California Gas and Union Electric 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 Union Electric are associated (or correlated) with Southern California. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern California Gas has no effect on the direction of Union Electric i.e., Union Electric and Southern California go up and down completely randomly.
Pair Corralation between Union Electric and Southern California
Assuming the 90 days horizon Union Electric is expected to generate 1.8 times more return on investment than Southern California. However, Union Electric is 1.8 times more volatile than Southern California Gas. It trades about 0.17 of its potential returns per unit of risk. Southern California Gas is currently generating about -0.1 per unit of risk. If you would invest 10,000 in Union Electric on September 3, 2024 and sell it today you would earn a total of 1,000.00 from holding Union Electric or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Union Electric vs. Southern California Gas
Performance |
| Timeline |
| Union Electric |
| Southern California Gas |
Union Electric and Southern California Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Union Electric and Southern California
The main advantage of trading using opposite Union Electric and Southern California positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Union Electric position performs unexpectedly, Southern California 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 Southern California will offset losses from the drop in Southern California's long position.| Union Electric vs. Suburban Propane Partners | Union Electric vs. SunOpta | Union Electric vs. Kinetik Holdings | Union Electric vs. Bridgford Foods |
| Southern California vs. Dynagas LNG Partners | Southern California vs. GasLog Partners LP | Southern California vs. GasLog Partners LP | Southern California vs. Genesis Energy LP |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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