Correlation Between SOUTHERN and CVW CleanTech

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

By analyzing existing cross correlation between SOUTHERN PER CORP and CVW CleanTech, you can compare the effects of market volatilities on SOUTHERN and CVW CleanTech 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 CVW CleanTech. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHERN and CVW CleanTech.

Diversification Opportunities for SOUTHERN and CVW CleanTech

0.49

Correlation Coefficient

SOUTHERN  CVW CleanTech

Very weak diversification

The 3 months correlation between SOUTHERN and CVW is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHERN PER CORP and CVW CleanTech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVW CleanTech 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 PER CORP are associated (or correlated) with CVW CleanTech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVW CleanTech has no effect on the direction of SOUTHERN i.e., SOUTHERN and CVW CleanTech go up and down completely randomly.

Pair Corralation between SOUTHERN and CVW CleanTech

Assuming the 90 days trading horizon SOUTHERN PER CORP is expected to generate 0.46 times more return on investment than CVW CleanTech. However, SOUTHERN PER CORP is 2.18 times less risky than CVW CleanTech. It trades about 0.01 of its potential returns per unit of risk. CVW CleanTech is currently generating about -0.02 per unit of risk. If you would invest  11,012  in SOUTHERN PER CORP on September 27, 2024 and sell it today you would earn a total of  5.00  from holding SOUTHERN PER CORP or generate 0.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

SOUTHERN PER CORP  vs.  CVW CleanTech

SOUTHERN PER P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOUTHERN PER CORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SOUTHERN is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

CVW CleanTech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVW CleanTech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with SOUTHERN and CVW CleanTech

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

The idea behind SOUTHERN PER CORP and CVW CleanTech 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.