Correlation Between Analog Devices and SOUTHERN

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

By analyzing existing cross correlation between Analog Devices and SOUTHERN PER CORP, you can compare the effects of market volatilities on Analog Devices and SOUTHERN 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 Analog Devices with a short position of SOUTHERN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and SOUTHERN.

Diversification Opportunities for Analog Devices and SOUTHERN

0.26

Correlation Coefficient

Analog Devices  SOUTHERN

Modest diversification

The 3 months correlation between Analog and SOUTHERN is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and SOUTHERN PER CORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN PER P and Analog Devices 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 Analog Devices are associated (or correlated) with SOUTHERN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOUTHERN PER P has no effect on the direction of Analog Devices i.e., Analog Devices and SOUTHERN go up and down completely randomly.

Pair Corralation between Analog Devices and SOUTHERN

Considering the 90-day investment horizon Analog Devices is expected to generate 4.23 times more return on investment than SOUTHERN. However, Analog Devices is 4.23 times more volatile than SOUTHERN PER CORP. It trades about 0.03 of its potential returns per unit of risk. SOUTHERN PER CORP is currently generating about -0.11 per unit of risk. If you would invest  21,012  in Analog Devices on September 21, 2024 and sell it today you would earn a total of  202.00  from holding Analog Devices or generate 0.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.91%
Values	Daily Returns

Analog Devices  vs.  SOUTHERN PER CORP

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOUTHERN is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Analog Devices and SOUTHERN

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

The idea behind Analog Devices and SOUTHERN PER CORP 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.