Correlation Between Southern Company and American States
Can any of the company-specific risk be diversified away by investing in both Southern Company and American States 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 American States 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 American States Water, you can compare the effects of market volatilities on Southern Company and American States 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 American States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Company and American States.
Diversification Opportunities for Southern Company and American States
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Southern and American is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Southern Company Series and American States Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American States Water 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 American States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American States Water has no effect on the direction of Southern Company i.e., Southern Company and American States go up and down completely randomly.
Pair Corralation between Southern Company and American States
Given the investment horizon of 90 days Southern Company is expected to generate 1.18 times less return on investment than American States. But when comparing it to its historical volatility, Southern Company Series is 1.56 times less risky than American States. It trades about 0.03 of its potential returns per unit of risk. American States Water is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 7,346 in American States Water on August 17, 2025 and sell it today you would earn a total of 113.00 from holding American States Water or generate 1.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Company Series vs. American States Water
Performance |
| Timeline |
| Southern Company |
| American States Water |
Southern Company and American States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern Company and American States
The main advantage of trading using opposite Southern Company and American States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern Company position performs unexpectedly, American States 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 American States will offset losses from the drop in American States' long position.| Southern Company vs. Korea Electric Power | Southern Company vs. Edison International | Southern Company vs. Duke Energy | Southern Company vs. Algonquin Power Utilities |
| American States vs. California Water Service | American States vs. Renew Energy Global | American States vs. Chesapeake Utilities | American States vs. Central Puerto SA |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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