Correlation Between Southern and Amazon
Can any of the company-specific risk be diversified away by investing in both Southern and Amazon 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 Amazon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Co and Amazon Inc, you can compare the effects of market volatilities on Southern and Amazon 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 Amazon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Amazon.
Diversification Opportunities for Southern and Amazon
Very good diversification
The 3 months correlation between Southern and Amazon is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Southern i.e., Southern and Amazon go up and down completely randomly.
Pair Corralation between Southern and Amazon
Given the investment horizon of 90 days Southern is expected to generate 1.99 times less return on investment than Amazon. But when comparing it to its historical volatility, Southern Co is 2.1 times less risky than Amazon. It trades about 0.05 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 11,477 in Amazon Inc on January 26, 2024 and sell it today you would earn a total of 6,182 from holding Amazon Inc or generate 53.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 11.94% |
| Values | Daily Returns |
Southern Co vs. Amazon Inc
Performance |
| Timeline |
| Southern |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Amazon Inc |
Southern and Amazon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Amazon
The main advantage of trading using opposite Southern and Amazon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, Amazon 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 Amazon will offset losses from the drop in Amazon's long position.| Southern vs. Mediag3 | Southern vs. FARO Technologies | Southern vs. Glacier Media | Southern vs. Asure Software |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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