Correlation Between Consolidated Edison and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison and Algonquin 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 Consolidated Edison and Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and Algonquin Power Utilities, you can compare the effects of market volatilities on Consolidated Edison and Algonquin 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 Consolidated Edison with a short position of Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and Algonquin Power.
Diversification Opportunities for Consolidated Edison and Algonquin Power
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Consolidated and Algonquin is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities 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 Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and Algonquin Power go up and down completely randomly.
Pair Corralation between Consolidated Edison and Algonquin Power
Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 0.79 times more return on investment than Algonquin Power. However, Consolidated Edison is 1.27 times less risky than Algonquin Power. It trades about 0.22 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.03 per unit of risk. If you would invest 8,901 in Consolidated Edison on November 9, 2024 and sell it today you would earn a total of 641.00 from holding Consolidated Edison or generate 7.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Edison vs. Algonquin Power Utilities
Performance |
| Timeline |
| Consolidated Edison |
| Algonquin Power Utilities |
Consolidated Edison and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and Algonquin Power
The main advantage of trading using opposite Consolidated Edison and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison position performs unexpectedly, Algonquin 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.| Consolidated Edison vs. Duke Energy | Consolidated Edison vs. Dominion Energy | Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy |
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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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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