Correlation Between Consolidated Edison and IDACORP
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison and IDACORP 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 IDACORP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and IDACORP, you can compare the effects of market volatilities on Consolidated Edison and IDACORP 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 IDACORP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and IDACORP.
Diversification Opportunities for Consolidated Edison and IDACORP
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Consolidated and IDACORP is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and IDACORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDACORP 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 IDACORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDACORP has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and IDACORP go up and down completely randomly.
Pair Corralation between Consolidated Edison and IDACORP
Allowing for the 90-day total investment horizon Consolidated Edison is expected to under-perform the IDACORP. But the stock apears to be less risky and, when comparing its historical volatility, Consolidated Edison is 1.34 times less risky than IDACORP. The stock trades about -0.21 of its potential returns per unit of risk. The IDACORP is currently generating about 0.54 of returns per unit of risk over similar time horizon. If you would invest 10,299 in IDACORP on August 27, 2024 and sell it today you would earn a total of 1,597 from holding IDACORP or generate 15.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Edison vs. IDACORP
Performance |
| Timeline |
| Consolidated Edison |
| IDACORP |
Consolidated Edison and IDACORP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and IDACORP
The main advantage of trading using opposite Consolidated Edison and IDACORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison position performs unexpectedly, IDACORP 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 IDACORP will offset losses from the drop in IDACORP's long position.| Consolidated Edison vs. Duke Energy | Consolidated Edison vs. Dominion Energy | Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy |
| IDACORP vs. CMS Energy | IDACORP vs. Pinnacle West Capital | IDACORP vs. Alliant Energy Corp | IDACORP vs. Portland General Electric |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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