Correlation Between Southern and PGE Corp

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

By analyzing existing cross correlation between Southern Company and PGE Corp, you can compare the effects of market volatilities on Southern and PGE Corp 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 PGE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and PGE Corp.

Diversification Opportunities for Southern and PGE Corp

0.14

Correlation Coefficient

Southern  PGE Corp

Average diversification

The 3 months correlation between Southern and PGE is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and PGE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE Corp 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 PGE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corp has no effect on the direction of Southern i.e., Southern and PGE Corp go up and down completely randomly.

Pair Corralation between Southern and PGE Corp

Allowing for the 90-day total investment horizon Southern Company is expected to under-perform the PGE Corp. In addition to that, Southern is 1.2 times more volatile than PGE Corp. It trades about -0.05 of its total potential returns per unit of risk. PGE Corp is currently generating about 0.38 per unit of volatility. If you would invest  2,022  in PGE Corp on September 1, 2024 and sell it today you would earn a total of  141.00  from holding PGE Corp or generate 6.97% return on investment over 90 days.

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

Southern Company  vs.  PGE Corp

Southern

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Southern is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

PGE Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PGE Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, PGE Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Southern and PGE Corp

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

The idea behind Southern Company and PGE Corp 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 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.