Correlation Between Southern Company and Boralex

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

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

Diversification Opportunities for Southern Company and Boralex

0.27

Correlation Coefficient

Southern Company  Boralex

Modest diversification

The 3 months correlation between Southern and Boralex is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company Series and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex and Southern Company 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 Series are associated (or correlated) with Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of Southern Company i.e., Southern Company and Boralex go up and down completely randomly.

Pair Corralation between Southern Company and Boralex

Given the investment horizon of 90 days Southern Company is expected to generate 3.47 times less return on investment than Boralex. But when comparing it to its historical volatility, Southern Company Series is 2.81 times less risky than Boralex. It trades about 0.03 of its potential returns per unit of risk. Boralex is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,990  in Boralex on December 29, 2024 and sell it today you would earn a total of  60.00  from holding Boralex or generate 3.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Southern Company Series  vs.  Boralex

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.

Boralex

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Boralex are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Boralex is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Southern Company and Boralex

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

The idea behind Southern Company Series and Boralex 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .