Correlation Between Dow Jones and Edison International
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Edison International 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 Dow Jones and Edison International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Edison International, you can compare the effects of market volatilities on Dow Jones and Edison International 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 Dow Jones with a short position of Edison International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Edison International.
Diversification Opportunities for Dow Jones and Edison International
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Edison is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Edison International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edison International has no effect on the direction of Dow Jones i.e., Dow Jones and Edison International go up and down completely randomly.
Pair Corralation between Dow Jones and Edison International
Assuming the 90 days trading horizon Dow Jones is expected to generate 1.03 times less return on investment than Edison International. But when comparing it to its historical volatility, Dow Jones Industrial is 1.87 times less risky than Edison International. It trades about 0.11 of its potential returns per unit of risk. Edison International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,246 in Edison International on August 31, 2024 and sell it today you would earn a total of 2,026 from holding Edison International or generate 32.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.77% |
| Values | Daily Returns |
Dow Jones Industrial vs. Edison International
Performance |
| Timeline |
Dow Jones and Edison International Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Edison International
Pair trading matchups for Edison International
Pair Trading with Dow Jones and Edison International
The main advantage of trading using opposite Dow Jones and Edison International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Edison International 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 Edison International will offset losses from the drop in Edison International's long position.| Dow Jones vs. Aerofoam Metals | Dow Jones vs. ACG Metals Limited | Dow Jones vs. China Clean Energy | Dow Jones vs. Fast Retailing Co |
| Edison International vs. Waste Management | Edison International vs. Western Copper and | Edison International vs. SERI INDUSTRIAL EO | Edison International vs. Q2M Managementberatung AG |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data |