Correlation Between Structured Products and Southern Company

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

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

Diversification Opportunities for Structured Products and Southern Company

0.24

Correlation Coefficient

Structured Products  Southern Company

Modest diversification

The 3 months correlation between Structured and Southern is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Structured Products Corp and Southern Company Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Company and Structured Products 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 Structured Products Corp are associated (or correlated) with Southern Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Company has no effect on the direction of Structured Products i.e., Structured Products and Southern Company go up and down completely randomly.

Pair Corralation between Structured Products and Southern Company

Considering the 90-day investment horizon Structured Products is expected to generate 2.92 times less return on investment than Southern Company. But when comparing it to its historical volatility, Structured Products Corp is 1.06 times less risky than Southern Company. It trades about 0.01 of its potential returns per unit of risk. Southern Company Series is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,835  in Southern Company Series on December 30, 2024 and sell it today you would earn a total of  22.00  from holding Southern Company Series or generate 1.2% return on investment over 90 days.

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

Structured Products Corp  vs.  Southern Company Series

Structured Products Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Structured Products Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Structured Products is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Southern Company

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Company Series are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking indicators, Southern Company is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Structured Products and Southern Company

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

The idea behind Structured Products Corp and Southern Company Series 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.