Correlation Between Southern Company and KKRS

Can any of the company-specific risk be diversified away by investing in both Southern Company and KKRS 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 KKRS 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 KKRS, you can compare the effects of market volatilities on Southern Company and KKRS 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 KKRS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Company and KKRS.

Diversification Opportunities for Southern Company and KKRS

0.9

Correlation Coefficient

Southern Company  KKRS

Almost no diversification

The 3 months correlation between Southern and KKRS is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company Series and KKRS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KKRS 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 KKRS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KKRS has no effect on the direction of Southern Company i.e., Southern Company and KKRS go up and down completely randomly.

Pair Corralation between Southern Company and KKRS

Given the investment horizon of 90 days Southern Company Series is expected to under-perform the KKRS. But the stock apears to be less risky and, when comparing its historical volatility, Southern Company Series is 1.36 times less risky than KKRS. The stock trades about -0.25 of its potential returns per unit of risk. The KKRS is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  2,051  in KKRS on September 18, 2024 and sell it today you would lose (136.00) from holding KKRS or give up 6.63% of portfolio value over 90 days.

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

Southern Company Series  vs.  KKRS

Southern Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Company Series has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the 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.

KKRS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KKRS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Southern Company and KKRS

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

The idea behind Southern Company Series and KKRS 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.