Correlation Between SOUTHERN and Atlantic American

Can any of the company-specific risk be diversified away by investing in both SOUTHERN and Atlantic American 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 Atlantic American 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 Atlantic American, you can compare the effects of market volatilities on SOUTHERN and Atlantic American 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 Atlantic American. Check out your portfolio center. Please also check ongoing floating volatility patterns of SOUTHERN and Atlantic American.

Diversification Opportunities for SOUTHERN and Atlantic American

0.29

Correlation Coefficient

SOUTHERN  Atlantic American

Modest diversification

The 3 months correlation between SOUTHERN and Atlantic is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding SOUTHERN PER CORP and Atlantic American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantic American 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 Atlantic American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantic American has no effect on the direction of SOUTHERN i.e., SOUTHERN and Atlantic American go up and down completely randomly.

Pair Corralation between SOUTHERN and Atlantic American

Assuming the 90 days trading horizon SOUTHERN PER CORP is expected to under-perform the Atlantic American. But the bond apears to be less risky and, when comparing its historical volatility, SOUTHERN PER CORP is 2.73 times less risky than Atlantic American. The bond trades about -0.04 of its potential returns per unit of risk. The Atlantic American is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  156.00  in Atlantic American on September 25, 2024 and sell it today you would lose (5.00) from holding Atlantic American or give up 3.21% of portfolio value over 90 days.

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

SOUTHERN PER CORP  vs.  Atlantic American

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.

Atlantic American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlantic American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Atlantic American is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with SOUTHERN and Atlantic American

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

The idea behind SOUTHERN PER CORP and Atlantic American 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.