Correlation Between Consolidated Edison and SCE Trust
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison and SCE Trust 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 SCE Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and SCE Trust VIII, you can compare the effects of market volatilities on Consolidated Edison and SCE Trust 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 SCE Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and SCE Trust.
Diversification Opportunities for Consolidated Edison and SCE Trust
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Consolidated and SCE is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and SCE Trust VIII in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCE Trust VIII 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 SCE Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCE Trust VIII has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and SCE Trust go up and down completely randomly.
Pair Corralation between Consolidated Edison and SCE Trust
Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 1.71 times more return on investment than SCE Trust. However, Consolidated Edison is 1.71 times more volatile than SCE Trust VIII. It trades about 0.24 of its potential returns per unit of risk. SCE Trust VIII is currently generating about -0.05 per unit of risk. If you would invest 9,405 in Consolidated Edison on November 28, 2024 and sell it today you would earn a total of 563.00 from holding Consolidated Edison or generate 5.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Edison vs. SCE Trust VIII
Performance |
| Timeline |
| Consolidated Edison |
| SCE Trust VIII |
Consolidated Edison and SCE Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and SCE Trust
The main advantage of trading using opposite Consolidated Edison and SCE Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison position performs unexpectedly, SCE Trust 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 SCE Trust will offset losses from the drop in SCE Trust's long position.| Consolidated Edison vs. Duke Energy | Consolidated Edison vs. Dominion Energy | Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy |
| SCE Trust vs. Willamette Valley Vineyards | SCE Trust vs. Vita Coco | SCE Trust vs. Crombie Real Estate | SCE Trust vs. BRC 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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