Correlation Between Georgia Power and DTE Energy

Can any of the company-specific risk be diversified away by investing in both Georgia Power and DTE Energy 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 DTE Energy 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 DTE Energy Co, you can compare the effects of market volatilities on Georgia Power and DTE Energy 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 DTE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Georgia Power and DTE Energy.

Diversification Opportunities for Georgia Power and DTE Energy

0.83

Correlation Coefficient

Georgia Power  DTE Energy

Very poor diversification

The 3 months correlation between Georgia and DTE is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Georgia Power Co and DTE Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy 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 DTE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTE Energy has no effect on the direction of Georgia Power i.e., Georgia Power and DTE Energy go up and down completely randomly.

Pair Corralation between Georgia Power and DTE Energy

Given the investment horizon of 90 days Georgia Power Co is expected to generate 1.03 times more return on investment than DTE Energy. However, Georgia Power is 1.03 times more volatile than DTE Energy Co. It trades about 0.13 of its potential returns per unit of risk. DTE Energy Co is currently generating about 0.04 per unit of risk. If you would invest  2,142  in Georgia Power Co on December 28, 2024 and sell it today you would earn a total of  157.00  from holding Georgia Power Co or generate 7.33% return on investment over 90 days.

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

Georgia Power Co  vs.  DTE Energy Co

Georgia Power

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Georgia Power Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady forward-looking indicators, Georgia Power may actually be approaching a critical reversion point that can send shares even higher in April 2025.

DTE Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DTE Energy Co are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, DTE Energy is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Georgia Power and DTE Energy

The main advantage of trading using opposite Georgia Power and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Georgia Power position performs unexpectedly, DTE Energy 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 DTE Energy will offset losses from the drop in DTE Energy's long position.

The idea behind Georgia Power Co and DTE Energy 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.