Correlation Between Southern Company and First National

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

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

Diversification Opportunities for Southern Company and First National

-0.76

Correlation Coefficient

Southern Company  First National

Pay attention - limited upside

The 3 months correlation between Southern and First is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company Series and First National Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Energy and Southern Company 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 Company Series are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Energy has no effect on the direction of Southern Company i.e., Southern Company and First National go up and down completely randomly.

Pair Corralation between Southern Company and First National

Given the investment horizon of 90 days Southern Company Series is expected to generate 0.14 times more return on investment than First National. However, Southern Company Series is 7.14 times less risky than First National. It trades about 0.06 of its potential returns per unit of risk. First National Energy is currently generating about -0.19 per unit of risk. If you would invest  1,749  in Southern Company Series on May 13, 2025 and sell it today you would earn a total of  46.00  from holding Southern Company Series or generate 2.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Southern Company Series  vs.  First National Energy

Southern Company

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Company Series are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward-looking indicators, Southern Company is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

First National Energy

Risk-Adjusted Performance

Weakest

Over the last 90 days First National Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in September 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Southern Company and First National

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

The idea behind Southern Company Series and First National Energy 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.