Correlation Between Consolidated Edison and Hennessy Gas
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison and Hennessy Gas 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 Hennessy Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and Hennessy Gas Utility, you can compare the effects of market volatilities on Consolidated Edison and Hennessy Gas 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 Hennessy Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and Hennessy Gas.
Diversification Opportunities for Consolidated Edison and Hennessy Gas
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Consolidated and Hennessy is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and Hennessy Gas Utility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Gas Utility 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 Hennessy Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Gas Utility has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and Hennessy Gas go up and down completely randomly.
Pair Corralation between Consolidated Edison and Hennessy Gas
Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 1.85 times less return on investment than Hennessy Gas. In addition to that, Consolidated Edison is 1.2 times more volatile than Hennessy Gas Utility. It trades about 0.02 of its total potential returns per unit of risk. Hennessy Gas Utility is currently generating about 0.04 per unit of volatility. If you would invest 2,342 in Hennessy Gas Utility on September 12, 2024 and sell it today you would earn a total of 387.00 from holding Hennessy Gas Utility or generate 16.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Consolidated Edison vs. Hennessy Gas Utility
Performance |
| Timeline |
| Consolidated Edison |
| Hennessy Gas Utility |
Consolidated Edison and Hennessy Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and Hennessy Gas
The main advantage of trading using opposite Consolidated Edison and Hennessy Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison position performs unexpectedly, Hennessy Gas 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 Hennessy Gas will offset losses from the drop in Hennessy Gas' long position.The idea behind Consolidated Edison and Hennessy Gas Utility 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.| Hennessy Gas vs. Utilities Fund Investor | Hennessy Gas vs. Amg Yacktman Focused | Hennessy Gas vs. Chemicals Portfolio Chemicals | Hennessy Gas vs. Invesco Energy Fund |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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