Correlation Between Vast Renewables and Southern

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

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

Diversification Opportunities for Vast Renewables and Southern

-0.31

Correlation Coefficient

Vast Renewables  Southern

Very good diversification

The 3 months correlation between Vast and Southern is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Vast Renewables Limited and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and Vast Renewables 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 Vast Renewables Limited 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 Vast Renewables i.e., Vast Renewables and Southern go up and down completely randomly.

Pair Corralation between Vast Renewables and Southern

Given the investment horizon of 90 days Vast Renewables Limited is expected to generate 26.18 times more return on investment than Southern. However, Vast Renewables is 26.18 times more volatile than Southern Company. It trades about 0.1 of its potential returns per unit of risk. Southern Company is currently generating about -0.06 per unit of risk. If you would invest  110.00  in Vast Renewables Limited on September 12, 2024 and sell it today you would earn a total of  38.00  from holding Vast Renewables Limited or generate 34.55% return on investment over 90 days.

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

Vast Renewables Limited  vs.  Southern Company

Vast Renewables

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vast Renewables Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Vast Renewables exhibited solid returns over the last few months and may actually be approaching a breakup point.

Southern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Southern is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Vast Renewables and Southern

The main advantage of trading using opposite Vast Renewables and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vast Renewables 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 Vast Renewables Limited and Southern Company 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.