Correlation Between Capital Income and Georgia Power
Can any of the company-specific risk be diversified away by investing in both Capital Income and Georgia Power 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 Capital Income and Georgia Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Income Builder and Georgia Power Co, you can compare the effects of market volatilities on Capital Income and Georgia Power 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 Capital Income with a short position of Georgia Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Income and Georgia Power.
Diversification Opportunities for Capital Income and Georgia Power
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Capital and Georgia is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Capital Income Builder and Georgia Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Georgia Power and Capital Income 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 Capital Income Builder are associated (or correlated) with Georgia Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Georgia Power has no effect on the direction of Capital Income i.e., Capital Income and Georgia Power go up and down completely randomly.
Pair Corralation between Capital Income and Georgia Power
Assuming the 90 days horizon Capital Income is expected to generate 1.5 times less return on investment than Georgia Power. But when comparing it to its historical volatility, Capital Income Builder is 2.37 times less risky than Georgia Power. It trades about 0.26 of its potential returns per unit of risk. Georgia Power Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 2,219 in Georgia Power Co on November 3, 2024 and sell it today you would earn a total of 102.00 from holding Georgia Power Co or generate 4.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Capital Income Builder vs. Georgia Power Co
Performance |
| Timeline |
| Capital Income Builder |
| Georgia Power |
Capital Income and Georgia Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Capital Income and Georgia Power
The main advantage of trading using opposite Capital Income and Georgia Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Income position performs unexpectedly, Georgia Power 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 Georgia Power will offset losses from the drop in Georgia Power's long position.| Capital Income vs. Blackrock Financial Institutions | Capital Income vs. Fidelity Advisor Financial | Capital Income vs. Blackstone Secured Lending | Capital Income vs. 1919 Financial Services |
| Georgia Power vs. Southern Co | Georgia Power vs. Entergy Arkansas LLC | Georgia Power vs. DTE Energy Co | Georgia Power vs. Entergy New Orleans |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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