Correlation Between Southern and Verde Clean

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

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

Diversification Opportunities for Southern and Verde Clean

-0.13

Correlation Coefficient

Southern  Verde Clean

Good diversification

The 3 months correlation between Southern and Verde is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and Verde Clean Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verde Clean Fuels and Southern 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 Southern Company are associated (or correlated) with Verde Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verde Clean Fuels has no effect on the direction of Southern i.e., Southern and Verde Clean go up and down completely randomly.

Pair Corralation between Southern and Verde Clean

Allowing for the 90-day total investment horizon Southern Company is expected to generate 0.48 times more return on investment than Verde Clean. However, Southern Company is 2.09 times less risky than Verde Clean. It trades about 0.12 of its potential returns per unit of risk. Verde Clean Fuels is currently generating about -0.06 per unit of risk. If you would invest  8,169  in Southern Company on December 28, 2024 and sell it today you would earn a total of  834.00  from holding Southern Company or generate 10.21% return on investment over 90 days.

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

Southern Company  vs.  Verde Clean Fuels

Southern

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Company are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Southern may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Verde Clean Fuels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Verde Clean Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Southern and Verde Clean

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

The idea behind Southern Company and Verde Clean Fuels 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.