Correlation Between Universal and SOUTHERN

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

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

Diversification Opportunities for Universal and SOUTHERN

-0.29

Correlation Coefficient

Universal  SOUTHERN

Very good diversification

The 3 months correlation between Universal and SOUTHERN is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Universal and SOUTHERN PER CORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOUTHERN PER P and Universal 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 Universal 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 PER P has no effect on the direction of Universal i.e., Universal and SOUTHERN go up and down completely randomly.

Pair Corralation between Universal and SOUTHERN

Considering the 90-day investment horizon Universal is expected to under-perform the SOUTHERN. But the stock apears to be less risky and, when comparing its historical volatility, Universal is 1.38 times less risky than SOUTHERN. The stock trades about -0.17 of its potential returns per unit of risk. The SOUTHERN PER CORP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  10,854  in SOUTHERN PER CORP on September 23, 2024 and sell it today you would earn a total of  163.00  from holding SOUTHERN PER CORP or generate 1.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Universal  vs.  SOUTHERN PER CORP

Universal

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Universal is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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.

Pair Trading with Universal and SOUTHERN

The main advantage of trading using opposite Universal and SOUTHERN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal 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 Universal and SOUTHERN PER CORP 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.