Correlation Between Southern and Macquarie/first

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

By analyzing existing cross correlation between Southern Co and Macquariefirst Tr Global, you can compare the effects of market volatilities on Southern and Macquarie/first 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 Macquarie/first. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Macquarie/first.

Diversification Opportunities for Southern and Macquarie/first

0.64

Correlation Coefficient

Southern  Macquarie/first

Poor diversification

The 3 months correlation between Southern and Macquarie/first is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and Macquariefirst Tr Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Macquariefirst Tr Global 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 Co are associated (or correlated) with Macquarie/first. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Macquariefirst Tr Global has no effect on the direction of Southern i.e., Southern and Macquarie/first go up and down completely randomly.

Pair Corralation between Southern and Macquarie/first

Given the investment horizon of 90 days Southern Co is expected to under-perform the Macquarie/first. In addition to that, Southern is 1.25 times more volatile than Macquariefirst Tr Global. It trades about -0.18 of its total potential returns per unit of risk. Macquariefirst Tr Global is currently generating about -0.01 per unit of volatility. If you would invest  744.00  in Macquariefirst Tr Global on February 5, 2024 and sell it today you would lose (2.00) from holding Macquariefirst Tr Global or give up 0.27% of portfolio value over 90 days.

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

Southern Co  vs.  Macquariefirst Tr Global

Southern

Risk-Adjusted Performance

0 of 100

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.

Macquariefirst Tr Global

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Macquariefirst Tr Global are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of rather sound technical and fundamental indicators, Macquarie/first is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Southern and Macquarie/first

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

The idea behind Southern Co and Macquariefirst Tr Global 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.