Correlation Between Southern Company and Azure Power
Can any of the company-specific risk be diversified away by investing in both Southern Company 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 Company 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 Company Series and Azure Power Global, you can compare the effects of market volatilities on Southern Company 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 Company with a short position of Azure Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Company and Azure Power.
Diversification Opportunities for Southern Company and Azure Power
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southern and Azure is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company Series 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 Company 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 Series 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 Company i.e., Southern Company and Azure Power go up and down completely randomly.
Pair Corralation between Southern Company and Azure Power
Given the investment horizon of 90 days Southern Company Series is expected to generate 0.1 times more return on investment than Azure Power. However, Southern Company Series is 9.56 times less risky than Azure Power. It trades about 0.04 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 1,669 in Southern Company Series on September 6, 2024 and sell it today you would earn a total of 279.00 from holding Southern Company Series or generate 16.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 29.09% |
Values | Daily Returns |
Southern Company Series vs. Azure Power Global
Performance |
Timeline |
Southern Company |
Azure Power Global |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Southern Company and Azure Power Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Southern Company and Azure Power
The main advantage of trading using opposite Southern Company and Azure Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Company 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 Company vs. Southern Co | Southern Company vs. DTE Energy | Southern Company vs. Southern Co | Southern Company vs. Prudential Financial 4125 |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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