Correlation Between Southern and Prudential Financial

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

By analyzing existing cross correlation between Southern Co and Prudential Financial 4125, you can compare the effects of market volatilities on Southern and Prudential Financial 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 Prudential Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Prudential Financial.

Diversification Opportunities for Southern and Prudential Financial

0.98

Correlation Coefficient

Southern  Prudential Financial

Almost no diversification

The 3 months correlation between Southern and Prudential is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and Prudential Financial 4125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Financial 4125 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 Prudential Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Financial 4125 has no effect on the direction of Southern i.e., Southern and Prudential Financial go up and down completely randomly.

Pair Corralation between Southern and Prudential Financial

Given the investment horizon of 90 days Southern is expected to generate 1.29 times less return on investment than Prudential Financial. In addition to that, Southern is 1.04 times more volatile than Prudential Financial 4125. It trades about 0.12 of its total potential returns per unit of risk. Prudential Financial 4125 is currently generating about 0.16 per unit of volatility. If you would invest  1,955  in Prudential Financial 4125 on July 16, 2024 and sell it today you would earn a total of  132.00  from holding Prudential Financial 4125 or generate 6.75% return on investment over 90 days.

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

Southern Co  vs.  Prudential Financial 4125

Southern

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Co are ranked lower than 9 (%) 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.

Prudential Financial 4125

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prudential Financial 4125 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, Prudential Financial may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Pair Trading with Southern and Prudential Financial

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

The idea behind Southern Co and Prudential Financial 4125 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.