Correlation Between Ameren Corp and Southern

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

By analyzing existing cross correlation between Ameren Corp and Southern Company, you can compare the effects of market volatilities on Ameren Corp 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 Ameren Corp with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameren Corp and Southern.

Diversification Opportunities for Ameren Corp and Southern

0.61

Correlation Coefficient

Ameren Corp  Southern

Poor diversification

The 3 months correlation between Ameren and Southern is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ameren Corp and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and Ameren Corp 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 Ameren Corp 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 has no effect on the direction of Ameren Corp i.e., Ameren Corp and Southern go up and down completely randomly.

Pair Corralation between Ameren Corp and Southern

Considering the 90-day investment horizon Ameren Corp is expected to generate 0.64 times more return on investment than Southern. However, Ameren Corp is 1.56 times less risky than Southern. It trades about 0.29 of its potential returns per unit of risk. Southern Company is currently generating about 0.18 per unit of risk. If you would invest  9,413  in Ameren Corp on November 28, 2024 and sell it today you would earn a total of  471.00  from holding Ameren Corp or generate 5.0% return on investment over 90 days.

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

Ameren Corp  vs.  Southern Company

Ameren Corp

Risk-Adjusted Performance

Modest

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

Southern

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Southern is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ameren Corp and Southern

The main advantage of trading using opposite Ameren Corp and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameren Corp 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 Ameren Corp and Southern Company 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.