Correlation Between American Financial and Southern

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

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

Diversification Opportunities for American Financial and Southern

0.71

Correlation Coefficient

American Financial  Southern

Poor diversification

The 3 months correlation between American and Southern is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding American Financial Group and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and American Financial 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 American Financial Group 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 American Financial i.e., American Financial and Southern go up and down completely randomly.

Pair Corralation between American Financial and Southern

Given the investment horizon of 90 days American Financial is expected to generate 2.11 times less return on investment than Southern. In addition to that, American Financial is 1.27 times more volatile than Southern Co. It trades about 0.05 of its total potential returns per unit of risk. Southern Co is currently generating about 0.13 per unit of volatility. If you would invest  1,961  in Southern Co on May 5, 2025 and sell it today you would earn a total of  101.00  from holding Southern Co or generate 5.15% return on investment over 90 days.

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

American Financial Group  vs.  Southern Co

American Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, American Financial 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

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. 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 American Financial and Southern

The main advantage of trading using opposite American Financial and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Financial 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 American Financial Group 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.