Correlation Between Southern and Stifel Financial

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

By analyzing existing cross correlation between Southern Co and Stifel Financial, you can compare the effects of market volatilities on Southern and Stifel Financial 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 Stifel Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Stifel Financial.

Diversification Opportunities for Southern and Stifel Financial

0.9

Correlation Coefficient

Southern  Stifel Financial

Almost no diversification

The 3 months correlation between Southern and Stifel is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and Stifel Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stifel Financial 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 Co are associated (or correlated) with Stifel Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stifel Financial has no effect on the direction of Southern i.e., Southern and Stifel Financial go up and down completely randomly.

Pair Corralation between Southern and Stifel Financial

Given the investment horizon of 90 days Southern Co is expected to under-perform the Stifel Financial. In addition to that, Southern is 1.39 times more volatile than Stifel Financial. It trades about -0.4 of its total potential returns per unit of risk. Stifel Financial is currently generating about -0.34 per unit of volatility. If you would invest  2,208  in Stifel Financial on September 22, 2024 and sell it today you would lose (75.00) from holding Stifel Financial or give up 3.4% of portfolio value over 90 days.

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

Southern Co  vs.  Stifel Financial

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 weak performance, the Preferred 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.

Stifel Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stifel Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Southern and Stifel Financial

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

The idea behind Southern Co and Stifel Financial 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.