Correlation Between Southern and Qwest Corp

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

By analyzing existing cross correlation between Southern Co and Qwest Corp 6, you can compare the effects of market volatilities on Southern and Qwest 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 Qwest Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Qwest Corp.

Diversification Opportunities for Southern and Qwest Corp

-0.61

Correlation Coefficient

Southern  Qwest Corp

Excellent diversification

The 3 months correlation between Southern and Qwest is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and Qwest Corp 6 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Qwest Corp 6 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 Qwest Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Qwest Corp 6 has no effect on the direction of Southern i.e., Southern and Qwest Corp go up and down completely randomly.

Pair Corralation between Southern and Qwest Corp

Given the investment horizon of 90 days Southern Co is expected to under-perform the Qwest Corp. But the preferred stock apears to be less risky and, when comparing its historical volatility, Southern Co is 3.37 times less risky than Qwest Corp. The preferred stock trades about -0.22 of its potential returns per unit of risk. The Qwest Corp 6 is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,671  in Qwest Corp 6 on September 20, 2024 and sell it today you would earn a total of  54.00  from holding Qwest Corp 6 or generate 3.23% return on investment over 90 days.

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

Southern Co  vs.  Qwest Corp 6

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.

Qwest Corp 6

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Qwest Corp 6 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Qwest Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Southern and Qwest Corp

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

The idea behind Southern Co and Qwest Corp 6 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.