Correlation Between Niagara Mohawk and Southern BancShares

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

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

Diversification Opportunities for Niagara Mohawk and Southern BancShares

0.04

Correlation Coefficient

Niagara Mohawk  Southern BancShares

Significant diversification

The 3 months correlation between Niagara and Southern is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Niagara Mohawk Power and Southern BancShares PFD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern BancShares PFD and Niagara Mohawk 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 Niagara Mohawk Power are associated (or correlated) with Southern BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern BancShares PFD has no effect on the direction of Niagara Mohawk i.e., Niagara Mohawk and Southern BancShares go up and down completely randomly.

Pair Corralation between Niagara Mohawk and Southern BancShares

Assuming the 90 days horizon Niagara Mohawk Power is expected to generate 0.95 times more return on investment than Southern BancShares. However, Niagara Mohawk Power is 1.05 times less risky than Southern BancShares. It trades about 0.11 of its potential returns per unit of risk. Southern BancShares PFD is currently generating about -0.09 per unit of risk. If you would invest  5,999  in Niagara Mohawk Power on September 14, 2024 and sell it today you would earn a total of  201.00  from holding Niagara Mohawk Power or generate 3.35% return on investment over 90 days.

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

Niagara Mohawk Power  vs.  Southern BancShares PFD

Niagara Mohawk Power

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Niagara Mohawk Power are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Niagara Mohawk is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Southern BancShares PFD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern BancShares PFD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Southern BancShares is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Niagara Mohawk and Southern BancShares

The main advantage of trading using opposite Niagara Mohawk and Southern BancShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Niagara Mohawk position performs unexpectedly, Southern BancShares 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 BancShares will offset losses from the drop in Southern BancShares' long position.

The idea behind Niagara Mohawk Power and Southern BancShares PFD 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 Commodity Directory module to find actively traded commodities issued by global exchanges.