Correlation Between United States and Southern

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

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

Diversification Opportunities for United States and Southern

0.32

Correlation Coefficient

United States  Southern

Weak diversification

The 3 months correlation between United and Southern is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding United States Cellular and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and United States 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 United States Cellular 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 United States i.e., United States and Southern go up and down completely randomly.

Pair Corralation between United States and Southern

Considering the 90-day investment horizon United States Cellular is expected to generate 0.88 times more return on investment than Southern. However, United States Cellular is 1.14 times less risky than Southern. It trades about 0.01 of its potential returns per unit of risk. Southern Co is currently generating about 0.0 per unit of risk. If you would invest  2,192  in United States Cellular on December 29, 2024 and sell it today you would earn a total of  8.00  from holding United States Cellular or generate 0.36% return on investment over 90 days.

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

United States Cellular  vs.  Southern Co

United States Cellular

Risk-Adjusted Performance

Very Weak

Over the last 90 days United States Cellular has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, United States 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

Very Weak

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

Pair Trading with United States and Southern

The main advantage of trading using opposite United States and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Cellular 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.