Correlation Between Southern and United States

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

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

Diversification Opportunities for Southern and United States

-0.43

Correlation Coefficient

Southern  United States

Very good diversification

The 3 months correlation between Southern and United is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and United States Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Cellular 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Cellular has no effect on the direction of Southern i.e., Southern and United States go up and down completely randomly.

Pair Corralation between Southern and United States

Given the investment horizon of 90 days Southern is expected to generate 5.47 times less return on investment than United States. But when comparing it to its historical volatility, Southern Co is 2.29 times less risky than United States. It trades about 0.02 of its potential returns per unit of risk. United States Cellular is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,454  in United States Cellular on October 2, 2024 and sell it today you would earn a total of  784.00  from holding United States Cellular or generate 53.92% return on investment over 90 days.

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

Southern Co  vs.  United States Cellular

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 unsteady 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.

United States Cellular

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, United States is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Southern and United States

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

The idea behind Southern Co and United States Cellular 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.