Correlation Between Georgia Power and Entergy Arkansas
Can any of the company-specific risk be diversified away by investing in both Georgia Power and Entergy Arkansas 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 Georgia Power and Entergy Arkansas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Georgia Power Co and Entergy Arkansas LLC, you can compare the effects of market volatilities on Georgia Power and Entergy Arkansas 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 Georgia Power with a short position of Entergy Arkansas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Georgia Power and Entergy Arkansas.
Diversification Opportunities for Georgia Power and Entergy Arkansas
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Georgia and Entergy is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Georgia Power Co and Entergy Arkansas LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Arkansas LLC and Georgia Power 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 Georgia Power Co are associated (or correlated) with Entergy Arkansas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Arkansas LLC has no effect on the direction of Georgia Power i.e., Georgia Power and Entergy Arkansas go up and down completely randomly.
Pair Corralation between Georgia Power and Entergy Arkansas
Given the investment horizon of 90 days Georgia Power Co is expected to under-perform the Entergy Arkansas. In addition to that, Georgia Power is 1.07 times more volatile than Entergy Arkansas LLC. It trades about -0.32 of its total potential returns per unit of risk. Entergy Arkansas LLC is currently generating about -0.24 per unit of volatility. If you would invest 2,297 in Entergy Arkansas LLC on August 24, 2024 and sell it today you would lose (88.00) from holding Entergy Arkansas LLC or give up 3.83% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Georgia Power Co vs. Entergy Arkansas LLC
Performance |
| Timeline |
| Georgia Power |
| Entergy Arkansas LLC |
Georgia Power and Entergy Arkansas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Georgia Power and Entergy Arkansas
The main advantage of trading using opposite Georgia Power and Entergy Arkansas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Georgia Power position performs unexpectedly, Entergy Arkansas 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 Entergy Arkansas will offset losses from the drop in Entergy Arkansas' long position.| Georgia Power vs. Southern Co | Georgia Power vs. Entergy Arkansas LLC | Georgia Power vs. DTE Energy Co | Georgia Power vs. Entergy New Orleans |
| Entergy Arkansas vs. Entergy Mississippi LLC | Entergy Arkansas vs. Entergy New Orleans | Entergy Arkansas vs. Entergy Louisiana LLC | Entergy Arkansas vs. Southern Co |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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