Correlation Between Utah Medical and Southern

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

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

Diversification Opportunities for Utah Medical and Southern

0.51

Correlation Coefficient

Utah Medical  Southern

Very weak diversification

The 3 months correlation between Utah and Southern is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Utah Medical Products and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and Utah Medical 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 Utah Medical Products are associated (or correlated) with Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of Utah Medical i.e., Utah Medical and Southern go up and down completely randomly.

Pair Corralation between Utah Medical and Southern

Given the investment horizon of 90 days Utah Medical Products is expected to under-perform the Southern. In addition to that, Utah Medical is 1.18 times more volatile than Southern Co. It trades about -0.09 of its total potential returns per unit of risk. Southern Co is currently generating about 0.02 per unit of volatility. If you would invest  2,194  in Southern Co on December 20, 2024 and sell it today you would earn a total of  19.00  from holding Southern Co or generate 0.87% return on investment over 90 days.

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

Utah Medical Products  vs.  Southern Co

Utah Medical Products

Risk-Adjusted Performance

Very Weak

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

Southern

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking indicators, Southern is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Utah Medical and Southern

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

The idea behind Utah Medical Products and Southern Co 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.