Correlation Between Consolidated Edison and Pinnacle West
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison and Pinnacle West 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 Pinnacle West into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and Pinnacle West Capital, you can compare the effects of market volatilities on Consolidated Edison and Pinnacle West 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 Pinnacle West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and Pinnacle West.
Diversification Opportunities for Consolidated Edison and Pinnacle West
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Consolidated and Pinnacle is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and Pinnacle West Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle West Capital 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 Pinnacle West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle West Capital has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and Pinnacle West go up and down completely randomly.
Pair Corralation between Consolidated Edison and Pinnacle West
Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 1.25 times more return on investment than Pinnacle West. However, Consolidated Edison is 1.25 times more volatile than Pinnacle West Capital. It trades about 0.22 of its potential returns per unit of risk. Pinnacle West Capital is currently generating about 0.23 per unit of risk. If you would invest 8,901 in Consolidated Edison on November 9, 2024 and sell it today you would earn a total of 641.00 from holding Consolidated Edison or generate 7.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Edison vs. Pinnacle West Capital
Performance |
| Timeline |
| Consolidated Edison |
| Pinnacle West Capital |
Consolidated Edison and Pinnacle West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and Pinnacle West
The main advantage of trading using opposite Consolidated Edison and Pinnacle West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison position performs unexpectedly, Pinnacle West 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 Pinnacle West will offset losses from the drop in Pinnacle West's long position.| Consolidated Edison vs. Duke Energy | Consolidated Edison vs. Dominion Energy | Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy |
| Pinnacle West vs. CMS Energy | Pinnacle West vs. Ameren Corp | Pinnacle West vs. MGE Energy | Pinnacle West 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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