Correlation Between Consolidated Edison and NewJersey Resources
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison and NewJersey Resources 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 NewJersey Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and NewJersey Resources, you can compare the effects of market volatilities on Consolidated Edison and NewJersey Resources 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 NewJersey Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and NewJersey Resources.
Diversification Opportunities for Consolidated Edison and NewJersey Resources
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Consolidated and NewJersey is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and NewJersey Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewJersey Resources 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 NewJersey Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewJersey Resources has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and NewJersey Resources go up and down completely randomly.
Pair Corralation between Consolidated Edison and NewJersey Resources
Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 0.91 times more return on investment than NewJersey Resources. However, Consolidated Edison is 1.1 times less risky than NewJersey Resources. It trades about 0.04 of its potential returns per unit of risk. NewJersey Resources is currently generating about 0.03 per unit of risk. If you would invest 8,785 in Consolidated Edison on September 2, 2024 and sell it today you would earn a total of 1,274 from holding Consolidated Edison or generate 14.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Edison vs. NewJersey Resources
Performance |
| Timeline |
| Consolidated Edison |
| NewJersey Resources |
Consolidated Edison and NewJersey Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and NewJersey Resources
The main advantage of trading using opposite Consolidated Edison and NewJersey Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison position performs unexpectedly, NewJersey Resources 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 NewJersey Resources will offset losses from the drop in NewJersey Resources' long position.| Consolidated Edison vs. Entergy | Consolidated Edison vs. Ameren Corp | Consolidated Edison vs. CenterPoint Energy | Consolidated Edison vs. Alliant Energy Corp |
| NewJersey Resources vs. Atmos Energy | NewJersey Resources vs. UGI Corporation | NewJersey Resources vs. Chesapeake Utilities | NewJersey Resources vs. Spire Inc |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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