Correlation Between United States and Southern Company
Can any of the company-specific risk be diversified away by investing in both United States and Southern Company 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 United States and Southern Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United States Cellular and Southern Company Series, you can compare the effects of market volatilities on United States and Southern Company 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 United States with a short position of Southern Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Southern Company.
Diversification Opportunities for United States and Southern Company
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between United and Southern is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding United States Cellular and Southern Company Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Company and United States 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 United States Cellular are associated (or correlated) with Southern Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Company has no effect on the direction of United States i.e., United States and Southern Company go up and down completely randomly.
Pair Corralation between United States and Southern Company
Considering the 90-day investment horizon United States Cellular is expected to generate 2.19 times more return on investment than Southern Company. However, United States is 2.19 times more volatile than Southern Company Series. It trades about 0.05 of its potential returns per unit of risk. Southern Company Series is currently generating about 0.04 per unit of risk. If you would invest 1,536 in United States Cellular on August 28, 2024 and sell it today you would earn a total of 846.00 from holding United States Cellular or generate 55.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Cellular vs. Southern Company Series
Performance |
| Timeline |
| United States Cellular |
| Southern Company |
United States and Southern Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Southern Company
The main advantage of trading using opposite United States and Southern Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States position performs unexpectedly, Southern Company 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 Company will offset losses from the drop in Southern Company's long position.| United States vs. United States Cellular | United States vs. United States Cellular | United States vs. Office Properties Income | United States vs. DBA Sempra 5750 |
| 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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