Correlation Between Entergy New and Georgia Power

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

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

Diversification Opportunities for Entergy New and Georgia Power

0.89

Correlation Coefficient

Entergy New  Georgia Power

Very poor diversification

The 3 months correlation between Entergy and Georgia is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Entergy New Orleans and Georgia Power Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Georgia Power and Entergy New 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 Entergy New Orleans 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 Entergy New i.e., Entergy New and Georgia Power go up and down completely randomly.

Pair Corralation between Entergy New and Georgia Power

Considering the 90-day investment horizon Entergy New Orleans is expected to generate 0.85 times more return on investment than Georgia Power. However, Entergy New Orleans is 1.18 times less risky than Georgia Power. It trades about -0.17 of its potential returns per unit of risk. Georgia Power Co is currently generating about -0.38 per unit of risk. If you would invest  2,345  in Entergy New Orleans on September 24, 2024 and sell it today you would lose (39.00) from holding Entergy New Orleans or give up 1.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Entergy New Orleans  vs.  Georgia Power Co

Entergy New Orleans

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entergy New Orleans has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm 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 Entergy New and Georgia Power

The main advantage of trading using opposite Entergy New and Georgia Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Entergy New 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 Entergy New Orleans 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.