Correlation Between Consolidated Edison and Gabelli Utilities

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Can any of the company-specific risk be diversified away by investing in both Consolidated Edison and Gabelli Utilities 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 Gabelli Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and The Gabelli Utilities, you can compare the effects of market volatilities on Consolidated Edison and Gabelli Utilities 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 Gabelli Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and Gabelli Utilities.

Diversification Opportunities for Consolidated Edison and Gabelli Utilities

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Consolidated and Gabelli is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and The Gabelli Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli 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 Gabelli Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Utilities has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and Gabelli Utilities go up and down completely randomly.

Pair Corralation between Consolidated Edison and Gabelli Utilities

Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 1.2 times more return on investment than Gabelli Utilities. However, Consolidated Edison is 1.2 times more volatile than The Gabelli Utilities. It trades about 0.02 of its potential returns per unit of risk. The Gabelli Utilities is currently generating about 0.01 per unit of risk. If you would invest  8,873  in Consolidated Edison on September 12, 2024 and sell it today you would earn a total of  596.00  from holding Consolidated Edison or generate 6.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

Consolidated Edison  vs.  The Gabelli Utilities

 Performance 
       Timeline  
Consolidated Edison 

Risk-Adjusted Performance

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Over the last 90 days Consolidated Edison has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.
Gabelli Utilities 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days The Gabelli Utilities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Gabelli Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Consolidated Edison and Gabelli Utilities Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Consolidated Edison and Gabelli Utilities

The main advantage of trading using opposite Consolidated Edison and Gabelli Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison position performs unexpectedly, Gabelli Utilities 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 Gabelli Utilities will offset losses from the drop in Gabelli Utilities' long position.
The idea behind Consolidated Edison and The Gabelli Utilities 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.
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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