Correlation Between Southern Energy and IShares Fundamental

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

By analyzing existing cross correlation between Southern Energy Corp and iShares Fundamental Hedged, you can compare the effects of market volatilities on Southern Energy and IShares Fundamental 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 Energy with a short position of IShares Fundamental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Energy and IShares Fundamental.

Diversification Opportunities for Southern Energy and IShares Fundamental

0.38

Correlation Coefficient

Southern Energy  IShares Fundamental

Weak diversification

The 3 months correlation between Southern and IShares is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Southern Energy Corp and iShares Fundamental Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Fundamental and Southern Energy 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 Energy Corp are associated (or correlated) with IShares Fundamental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Fundamental has no effect on the direction of Southern Energy i.e., Southern Energy and IShares Fundamental go up and down completely randomly.

Pair Corralation between Southern Energy and IShares Fundamental

Assuming the 90 days horizon Southern Energy Corp is expected to under-perform the IShares Fundamental. In addition to that, Southern Energy is 9.65 times more volatile than iShares Fundamental Hedged. It trades about -0.1 of its total potential returns per unit of risk. iShares Fundamental Hedged is currently generating about 0.02 per unit of volatility. If you would invest  5,380  in iShares Fundamental Hedged on December 28, 2024 and sell it today you would earn a total of  49.00  from holding iShares Fundamental Hedged or generate 0.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Southern Energy Corp  vs.  iShares Fundamental Hedged

Southern Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

iShares Fundamental

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Fundamental Hedged are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, IShares Fundamental is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Southern Energy and IShares Fundamental

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

The idea behind Southern Energy Corp and iShares Fundamental Hedged 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.