Correlation Between South Jersey and Southern Company

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

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

Diversification Opportunities for South Jersey and Southern Company

0.0

Correlation Coefficient

South Jersey  Southern Company

Pay attention - limited upside

The 3 months correlation between South and Southern is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding South Jersey Industries and Southern Company Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Company and South Jersey 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 South Jersey Industries 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 South Jersey i.e., South Jersey and Southern Company go up and down completely randomly.

Pair Corralation between South Jersey and Southern Company

If you would invest  1,835  in Southern Company Series on December 29, 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	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

South Jersey Industries  vs.  Southern Company Series

South Jersey Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days South Jersey Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, South Jersey is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 South Jersey and Southern Company

The main advantage of trading using opposite South Jersey and Southern Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South Jersey 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 South Jersey Industries 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.