Correlation Between Consolidated Edison and Entergy
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison and Entergy 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 Entergy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and Entergy, you can compare the effects of market volatilities on Consolidated Edison and Entergy 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 Entergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and Entergy.
Diversification Opportunities for Consolidated Edison and Entergy
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Consolidated and Entergy is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and Entergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy 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 Entergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and Entergy go up and down completely randomly.
Pair Corralation between Consolidated Edison and Entergy
Allowing for the 90-day total investment horizon Consolidated Edison is expected to under-perform the Entergy. But the stock apears to be less risky and, when comparing its historical volatility, Consolidated Edison is 3.47 times less risky than Entergy. The stock trades about -0.24 of its potential returns per unit of risk. The Entergy is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 13,389 in Entergy on August 23, 2024 and sell it today you would earn a total of 1,766 from holding Entergy or generate 13.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Edison vs. Entergy
Performance |
| Timeline |
| Consolidated Edison |
| Entergy |
Consolidated Edison and Entergy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and Entergy
The main advantage of trading using opposite Consolidated Edison and Entergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison position performs unexpectedly, Entergy 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 Entergy will offset losses from the drop in Entergy's long position.| Consolidated Edison vs. Duke Energy | Consolidated Edison vs. Dominion Energy | Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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