Correlation Between Celestica and Southern

Can any of the company-specific risk be diversified away by investing in both Celestica 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 Celestica and Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Celestica and Southern Co, you can compare the effects of market volatilities on Celestica 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 Celestica with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Celestica and Southern.

Diversification Opportunities for Celestica and Southern

-0.87

Correlation Coefficient

Celestica  Southern

Pay attention - limited upside

The 3 months correlation between Celestica and Southern is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Celestica and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and Celestica 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 Celestica 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 Celestica i.e., Celestica and Southern go up and down completely randomly.

Pair Corralation between Celestica and Southern

Considering the 90-day investment horizon Celestica is expected to generate 5.69 times more return on investment than Southern. However, Celestica is 5.69 times more volatile than Southern Co. It trades about 0.29 of its potential returns per unit of risk. Southern Co is currently generating about -0.25 per unit of risk. If you would invest  4,963  in Celestica on September 21, 2024 and sell it today you would earn a total of  4,342  from holding Celestica or generate 87.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Celestica  vs.  Southern Co

Celestica

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Celestica are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Celestica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Southern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Celestica and Southern

The main advantage of trading using opposite Celestica and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celestica 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.

The idea behind Celestica and Southern Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.