Correlation Between Southern and CenterPoint Energy
Can any of the company-specific risk be diversified away by investing in both Southern and CenterPoint Energy 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 CenterPoint Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Company and CenterPoint Energy, you can compare the effects of market volatilities on Southern and CenterPoint Energy 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 CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and CenterPoint Energy.
Diversification Opportunities for Southern and CenterPoint Energy
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Southern and CenterPoint is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy 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 Company are associated (or correlated) with CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of Southern i.e., Southern and CenterPoint Energy go up and down completely randomly.
Pair Corralation between Southern and CenterPoint Energy
Allowing for the 90-day total investment horizon Southern Company is expected to generate 1.0 times more return on investment than CenterPoint Energy. However, Southern is 1.0 times more volatile than CenterPoint Energy. It trades about -0.15 of its potential returns per unit of risk. CenterPoint Energy is currently generating about -0.2 per unit of risk. If you would invest 9,365 in Southern Company on June 6, 2025 and sell it today you would lose (199.00) from holding Southern Company or give up 2.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company vs. CenterPoint Energy
Performance |
| Timeline |
| Southern |
| CenterPoint Energy |
Southern and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and CenterPoint Energy
The main advantage of trading using opposite Southern and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern position performs unexpectedly, CenterPoint Energy 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy's long position.| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
| CenterPoint Energy vs. Xcel Energy | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Entergy | CenterPoint Energy vs. Pinnacle West Capital |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |