Correlation Between Consolidated Edison and PGE Corp
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison and PGE Corp 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 PGE Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and PGE Corp, you can compare the effects of market volatilities on Consolidated Edison and PGE Corp 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 PGE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and PGE Corp.
Diversification Opportunities for Consolidated Edison and PGE Corp
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Consolidated and PGE is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and PGE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE Corp 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 PGE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corp has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and PGE Corp go up and down completely randomly.
Pair Corralation between Consolidated Edison and PGE Corp
Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 0.73 times more return on investment than PGE Corp. However, Consolidated Edison is 1.37 times less risky than PGE Corp. It trades about 0.03 of its potential returns per unit of risk. PGE Corp is currently generating about -0.02 per unit of risk. If you would invest 8,844 in Consolidated Edison on November 9, 2024 and sell it today you would earn a total of 698.00 from holding Consolidated Edison or generate 7.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Edison vs. PGE Corp
Performance |
| Timeline |
| Consolidated Edison |
| PGE Corp |
Consolidated Edison and PGE Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and PGE Corp
The main advantage of trading using opposite Consolidated Edison and PGE Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison position performs unexpectedly, PGE Corp 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 PGE Corp will offset losses from the drop in PGE Corp's long position.| Consolidated Edison vs. Duke Energy | Consolidated Edison vs. Dominion Energy | Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy |
| PGE Corp vs. Consolidated Edison | PGE Corp vs. Southern Company | PGE Corp vs. Entergy | PGE Corp vs. Pinnacle West Capital |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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