Correlation Between National Rural and Southern

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

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

Diversification Opportunities for National Rural and Southern

0.88

Correlation Coefficient

National Rural  Southern

Very poor diversification

The 3 months correlation between National and Southern is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding National Rural Utilities and Southern Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and National Rural 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 National Rural Utilities 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 National Rural i.e., National Rural and Southern go up and down completely randomly.

Pair Corralation between National Rural and Southern

Given the investment horizon of 90 days National Rural is expected to generate 1.27 times less return on investment than Southern. In addition to that, National Rural is 1.0 times more volatile than Southern Co. It trades about 0.18 of its total potential returns per unit of risk. Southern Co is currently generating about 0.23 per unit of volatility. If you would invest  2,114  in Southern Co on May 6, 2025 and sell it today you would earn a total of  177.00  from holding Southern Co or generate 8.37% return on investment over 90 days.

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

National Rural Utilities  vs.  Southern Co

National Rural Utilities

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Rural Utilities are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, National Rural may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Southern

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Co are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward-looking indicators, Southern may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with National Rural and Southern

The main advantage of trading using opposite National Rural and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Rural 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 National Rural Utilities 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.