Correlation Between Consolidated Edison and Ameren Illinois
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison and Ameren Illinois 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 Consolidated Edison and Ameren Illinois into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and Ameren Illinois, you can compare the effects of market volatilities on Consolidated Edison and Ameren Illinois 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 Consolidated Edison with a short position of Ameren Illinois. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and Ameren Illinois.
Diversification Opportunities for Consolidated Edison and Ameren Illinois
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Consolidated and Ameren is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois and Consolidated Edison 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 Consolidated Edison are associated (or correlated) with Ameren Illinois. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Illinois has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and Ameren Illinois go up and down completely randomly.
Pair Corralation between Consolidated Edison and Ameren Illinois
Allowing for the 90-day total investment horizon Consolidated Edison is expected to under-perform the Ameren Illinois. In addition to that, Consolidated Edison is 4.17 times more volatile than Ameren Illinois. It trades about -0.2 of its total potential returns per unit of risk. Ameren Illinois is currently generating about -0.01 per unit of volatility. If you would invest 8,200 in Ameren Illinois on September 12, 2024 and sell it today you would lose (5.00) from holding Ameren Illinois or give up 0.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Edison vs. Ameren Illinois
Performance |
| Timeline |
| Consolidated Edison |
| Ameren Illinois |
Consolidated Edison and Ameren Illinois Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and Ameren Illinois
The main advantage of trading using opposite Consolidated Edison and Ameren Illinois positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison position performs unexpectedly, Ameren Illinois 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 Ameren Illinois will offset losses from the drop in Ameren Illinois' long position.| Consolidated Edison vs. Duke Energy | Consolidated Edison vs. Dominion Energy | Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy |
| Ameren Illinois vs. Duke Energy | Ameren Illinois vs. Consolidated Edison | Ameren Illinois vs. Dominion Energy | Ameren Illinois vs. American Electric Power |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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