Correlation Between Southern Company and United States

Can any of the company-specific risk be diversified away by investing in both Southern Company 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 Company 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 Company Series and United States Cellular, you can compare the effects of market volatilities on Southern Company 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 Company with a short position of United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Company and United States.

Diversification Opportunities for Southern Company and United States

-0.36

Correlation Coefficient

Southern Company  United States

Very good diversification

The 3 months correlation between Southern and United is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company Series 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 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 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 Company i.e., Southern Company and United States go up and down completely randomly.

Pair Corralation between Southern Company and United States

Given the investment horizon of 90 days Southern Company Series is expected to under-perform the United States. In addition to that, Southern Company is 1.42 times more volatile than United States Cellular. It trades about -0.08 of its total potential returns per unit of risk. United States Cellular is currently generating about 0.27 per unit of volatility. If you would invest  2,073  in United States Cellular on September 2, 2024 and sell it today you would earn a total of  205.00  from holding United States Cellular or generate 9.89% return on investment over 90 days.

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

Southern Company Series  vs.  United States Cellular

Southern Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Company Series has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

United States Cellular

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, United States may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Southern Company and United States

The main advantage of trading using opposite Southern Company and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Company 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 Company Series 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.