Correlation Between Southern and Azure Power
Can any of the company-specific risk be diversified away by investing in both Southern and Azure Power 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 Azure Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Co and Azure Power Global, you can compare the effects of market volatilities on Southern and Azure Power 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 Azure Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Azure Power.
Diversification Opportunities for Southern and Azure Power
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southern and Azure is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and Azure Power Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azure Power Global 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 Co are associated (or correlated) with Azure Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azure Power Global has no effect on the direction of Southern i.e., Southern and Azure Power go up and down completely randomly.
Pair Corralation between Southern and Azure Power
Given the investment horizon of 90 days Southern Co is expected to generate 0.09 times more return on investment than Azure Power. However, Southern Co is 10.93 times less risky than Azure Power. It trades about 0.03 of its potential returns per unit of risk. Azure Power Global is currently generating about -0.13 per unit of risk. If you would invest 2,047 in Southern Co on September 6, 2024 and sell it today you would earn a total of 261.00 from holding Southern Co or generate 12.75% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 29.09% |
Values | Daily Returns |
Southern Co vs. Azure Power Global
Performance |
Timeline |
Southern |
Azure Power Global |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Southern and Azure Power Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Southern and Azure Power
The main advantage of trading using opposite Southern and Azure Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Azure Power 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 Azure Power will offset losses from the drop in Azure Power's long position.Southern vs. Consumers Energy | Southern vs. CMS Energy | Southern vs. Cadiz Depositary Shares | Southern vs. DTE Energy |
Azure Power vs. Altus Power | Azure Power vs. Ormat Technologies | Azure Power vs. Enlight Renewable Energy | Azure Power vs. Fluence Energy |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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