Correlation Between Southern and Georgia Power
Can any of the company-specific risk be diversified away by investing in both Southern 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 Southern and Georgia Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern Co and Georgia Power Co, you can compare the effects of market volatilities on Southern 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 Southern with a short position of Georgia Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern and Georgia Power.
Diversification Opportunities for Southern and Georgia Power
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Southern and Georgia is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Southern Co and Georgia Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Georgia Power 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 Co 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 Southern i.e., Southern and Georgia Power go up and down completely randomly.
Pair Corralation between Southern and Georgia Power
Given the investment horizon of 90 days Southern is expected to generate 1.9 times less return on investment than Georgia Power. But when comparing it to its historical volatility, Southern Co is 1.06 times less risky than Georgia Power. It trades about 0.08 of its potential returns per unit of risk. Georgia Power Co is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 2,155 in Georgia Power Co on October 22, 2024 and sell it today you would earn a total of 73.00 from holding Georgia Power Co or generate 3.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern Co vs. Georgia Power Co
Performance |
| Timeline |
| Southern |
| Georgia Power |
Southern and Georgia Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern and Georgia Power
The main advantage of trading using opposite Southern and Georgia Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern 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.| Southern vs. Southern Co | Southern vs. Southern Company Series | Southern vs. ATT Inc | Southern vs. Aegon Funding |
| 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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