Correlation Between Southern and VivoPower International

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

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

Diversification Opportunities for Southern and VivoPower International

0.07

Correlation Coefficient

Southern  VivoPower International

Significant diversification

The 3 months correlation between Southern and VivoPower is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and VivoPower International PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VivoPower International 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 VivoPower International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VivoPower International has no effect on the direction of Southern i.e., Southern and VivoPower International go up and down completely randomly.

Pair Corralation between Southern and VivoPower International

Given the investment horizon of 90 days Southern Co is expected to generate 0.15 times more return on investment than VivoPower International. However, Southern Co is 6.51 times less risky than VivoPower International. It trades about 0.02 of its potential returns per unit of risk. VivoPower International PLC is currently generating about -0.13 per unit of risk. If you would invest  2,065  in Southern Co on December 21, 2024 and sell it today you would earn a total of  22.00  from holding Southern Co or generate 1.07% return on investment over 90 days.

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

Southern Co  vs.  VivoPower International PLC

Southern

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking indicators, Southern is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

VivoPower International

Risk-Adjusted Performance

Very Weak

Over the last 90 days VivoPower International PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Southern and VivoPower International

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

The idea behind Southern Co and VivoPower International PLC 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.