Correlation Between Affiliated Managers and Southern

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

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

Diversification Opportunities for Affiliated Managers and Southern

0.48

Correlation Coefficient

Affiliated Managers  Southern

Very weak diversification

The 3 months correlation between Affiliated and Southern is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Affiliated Managers Group and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and Affiliated Managers 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 Affiliated Managers Group 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 Affiliated Managers i.e., Affiliated Managers and Southern go up and down completely randomly.

Pair Corralation between Affiliated Managers and Southern

Considering the 90-day investment horizon Affiliated Managers Group is expected to generate 0.77 times more return on investment than Southern. However, Affiliated Managers Group is 1.29 times less risky than Southern. It trades about -0.18 of its potential returns per unit of risk. Southern Co is currently generating about -0.21 per unit of risk. If you would invest  2,459  in Affiliated Managers Group on September 5, 2024 and sell it today you would lose (107.00) from holding Affiliated Managers Group or give up 4.35% of portfolio value over 90 days.

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

Affiliated Managers Group  vs.  Southern Co

Affiliated Managers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Affiliated Managers Group has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Affiliated Managers is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Southern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating 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.

Pair Trading with Affiliated Managers and Southern

The main advantage of trading using opposite Affiliated Managers and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affiliated Managers 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 Affiliated Managers Group and Southern Co 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.