Correlation Between Southern and MicroSectorsTM Oil
Can any of the company-specific risk be diversified away by investing in both Southern and MicroSectorsTM Oil 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 and MicroSectorsTM Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company and MicroSectorsTM Oil Gas, you can compare the effects of market volatilities on Southern and MicroSectorsTM Oil 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 with a short position of MicroSectorsTM Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and MicroSectorsTM Oil.
Diversification Opportunities for Southern and MicroSectorsTM Oil
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Southern and MicroSectorsTM is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and MicroSectorsTM Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroSectorsTM Oil Gas and Southern 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 are associated (or correlated) with MicroSectorsTM Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroSectorsTM Oil Gas has no effect on the direction of Southern i.e., Southern and MicroSectorsTM Oil go up and down completely randomly.
Pair Corralation between Southern and MicroSectorsTM Oil
Allowing for the 90-day total investment horizon Southern Company is expected to generate 0.51 times more return on investment than MicroSectorsTM Oil. However, Southern Company is 1.97 times less risky than MicroSectorsTM Oil. It trades about 0.18 of its potential returns per unit of risk. MicroSectorsTM Oil Gas is currently generating about -0.12 per unit of risk. If you would invest 6,976 in Southern Company on January 24, 2024 and sell it today you would earn a total of 322.00 from holding Southern Company or generate 4.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company vs. MicroSectorsTM Oil Gas
Performance |
| Timeline |
| Southern |
| MicroSectorsTM Oil Gas |
Southern and MicroSectorsTM Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and MicroSectorsTM Oil
The main advantage of trading using opposite Southern and MicroSectorsTM Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, MicroSectorsTM Oil 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 MicroSectorsTM Oil will offset losses from the drop in MicroSectorsTM Oil's long position.| Southern vs. Centrais Eltricas Brasileiras | Southern vs. Central Puerto SA | 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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