Correlation Between Consolidated Edison and MGE Energy
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison and MGE Energy 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 MGE Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and MGE Energy, you can compare the effects of market volatilities on Consolidated Edison and MGE Energy 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 MGE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and MGE Energy.
Diversification Opportunities for Consolidated Edison and MGE Energy
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Consolidated and MGE is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and MGE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MGE Energy 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 MGE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MGE Energy has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and MGE Energy go up and down completely randomly.
Pair Corralation between Consolidated Edison and MGE Energy
Allowing for the 90-day total investment horizon Consolidated Edison is expected to under-perform the MGE Energy. But the stock apears to be less risky and, when comparing its historical volatility, Consolidated Edison is 2.36 times less risky than MGE Energy. The stock trades about -0.21 of its potential returns per unit of risk. The MGE Energy is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 9,169 in MGE Energy on August 27, 2024 and sell it today you would earn a total of 1,306 from holding MGE Energy or generate 14.24% 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. MGE Energy
Performance |
| Timeline |
| Consolidated Edison |
| MGE Energy |
Consolidated Edison and MGE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and MGE Energy
The main advantage of trading using opposite Consolidated Edison and MGE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison position performs unexpectedly, MGE Energy 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 MGE Energy will offset losses from the drop in MGE Energy's long position.| Consolidated Edison vs. Duke Energy | Consolidated Edison vs. Dominion Energy | Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy |
| MGE Energy vs. CMS Energy | MGE Energy vs. Ameren Corp | MGE Energy vs. Pinnacle West Capital | MGE Energy vs. Evergy, |
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 CEOs Directory module to screen CEOs from public companies around the world.
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