Correlation Between Crawford and Southern

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

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

Diversification Opportunities for Crawford and Southern

-0.46

Correlation Coefficient

Crawford  Southern

Very good diversification

The 3 months correlation between Crawford and Southern is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Crawford Company and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and Crawford 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 Crawford Company 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 Crawford i.e., Crawford and Southern go up and down completely randomly.

Pair Corralation between Crawford and Southern

Assuming the 90 days horizon Crawford Company is expected to under-perform the Southern. In addition to that, Crawford is 2.09 times more volatile than Southern Co. It trades about -0.15 of its total potential returns per unit of risk. Southern Co is currently generating about 0.19 per unit of volatility. If you would invest  2,271  in Southern Co on March 29, 2024 and sell it today you would earn a total of  66.00  from holding Southern Co or generate 2.91% return on investment over 90 days.

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

Crawford Company  vs.  Southern Co

Crawford

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crawford Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Crawford is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Crawford and Southern

The main advantage of trading using opposite Crawford and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crawford 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 Crawford Company 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.