Correlation Between Southern and PwrCor

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

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

Diversification Opportunities for Southern and PwrCor

-0.41

Correlation Coefficient

Southern  PwrCor

Very good diversification

The 3 months correlation between Southern and PwrCor is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and PwrCor Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PwrCor Inc 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 PwrCor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PwrCor Inc has no effect on the direction of Southern i.e., Southern and PwrCor go up and down completely randomly.

Pair Corralation between Southern and PwrCor

Given the investment horizon of 90 days Southern Co is expected to under-perform the PwrCor. But the preferred stock apears to be less risky and, when comparing its historical volatility, Southern Co is 21.9 times less risky than PwrCor. The preferred stock trades about -0.12 of its potential returns per unit of risk. The PwrCor Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3.91  in PwrCor Inc on September 4, 2024 and sell it today you would earn a total of  0.34  from holding PwrCor Inc or generate 8.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.92%
Values	Daily Returns

Southern Co  vs.  PwrCor Inc

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 rather sound forward-looking indicators, Southern is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

PwrCor Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PwrCor Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, PwrCor displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern and PwrCor

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

The idea behind Southern Co and PwrCor Inc 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.