Correlation Between WEC Energy and Southern
Can any of the company-specific risk be diversified away by investing in both WEC Energy and Southern 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 WEC Energy and Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WEC Energy Group and Southern Company, you can compare the effects of market volatilities on WEC Energy and Southern 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 WEC Energy with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEC Energy and Southern.
Diversification Opportunities for WEC Energy and Southern
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between WEC and Southern is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and WEC 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 WEC Energy Group are associated (or correlated) with Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of WEC Energy i.e., WEC Energy and Southern go up and down completely randomly.
Pair Corralation between WEC Energy and Southern
Considering the 90-day investment horizon WEC Energy Group is expected to generate 1.03 times more return on investment than Southern. However, WEC Energy is 1.03 times more volatile than Southern Company. It trades about -0.05 of its potential returns per unit of risk. Southern Company is currently generating about -0.2 per unit of risk. If you would invest 9,701 in WEC Energy Group on September 13, 2024 and sell it today you would lose (101.00) from holding WEC Energy Group or give up 1.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WEC Energy Group vs. Southern Company
Performance |
| Timeline |
| WEC Energy Group |
| Southern |
WEC Energy and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WEC Energy and Southern
The main advantage of trading using opposite WEC Energy and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC Energy position performs unexpectedly, Southern 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 will offset losses from the drop in Southern's long position.| WEC Energy vs. Duke Energy | WEC Energy vs. American Electric Power | WEC Energy vs. Nextera Energy | WEC Energy vs. Southern Company |
| Southern vs. Centrais Eltricas Brasileiras | Southern vs. Korea Electric Power | Southern vs. CMS Energy | Southern vs. Centrais Electricas Brasileiras |
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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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