Correlation Between Duke Energy and Georgia Power

Can any of the company-specific risk be diversified away by investing in both Duke Energy 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 Duke Energy and Georgia Power into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Duke Energy Corp and Georgia Power Co, you can compare the effects of market volatilities on Duke Energy 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 Duke Energy with a short position of Georgia Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duke Energy and Georgia Power.

Diversification Opportunities for Duke Energy and Georgia Power

0.85

Correlation Coefficient

Duke Energy  Georgia Power

Very poor diversification

The 3 months correlation between Duke and Georgia is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy Corp and Georgia Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Georgia Power and Duke Energy 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 Duke Energy Corp 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 Duke Energy i.e., Duke Energy and Georgia Power go up and down completely randomly.

Pair Corralation between Duke Energy and Georgia Power

Given the investment horizon of 90 days Duke Energy Corp is expected to generate 0.8 times more return on investment than Georgia Power. However, Duke Energy Corp is 1.25 times less risky than Georgia Power. It trades about -0.04 of its potential returns per unit of risk. Georgia Power Co is currently generating about -0.24 per unit of risk. If you would invest  2,444  in Duke Energy Corp on September 19, 2024 and sell it today you would lose (9.00) from holding Duke Energy Corp or give up 0.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Duke Energy Corp  vs.  Georgia Power Co

Duke Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duke Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, Duke Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Georgia Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Georgia Power Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's forward-looking indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Duke Energy and Georgia Power

The main advantage of trading using opposite Duke Energy and Georgia Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duke Energy 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.

The idea behind Duke Energy Corp and Georgia Power Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.