Correlation Between EDISON INTL and ITALIAN WINE
Can any of the company-specific risk be diversified away by investing in both EDISON INTL and ITALIAN WINE 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 EDISON INTL and ITALIAN WINE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDISON INTL and ITALIAN WINE BRANDS, you can compare the effects of market volatilities on EDISON INTL and ITALIAN WINE 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 EDISON INTL with a short position of ITALIAN WINE. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDISON INTL and ITALIAN WINE.
Diversification Opportunities for EDISON INTL and ITALIAN WINE
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EDISON and ITALIAN is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding EDISON INTL and ITALIAN WINE BRANDS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITALIAN WINE BRANDS and EDISON INTL 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 EDISON INTL are associated (or correlated) with ITALIAN WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITALIAN WINE BRANDS has no effect on the direction of EDISON INTL i.e., EDISON INTL and ITALIAN WINE go up and down completely randomly.
Pair Corralation between EDISON INTL and ITALIAN WINE
Assuming the 90 days trading horizon EDISON INTL is expected to generate 1.03 times more return on investment than ITALIAN WINE. However, EDISON INTL is 1.03 times more volatile than ITALIAN WINE BRANDS. It trades about 0.38 of its potential returns per unit of risk. ITALIAN WINE BRANDS is currently generating about -0.07 per unit of risk. If you would invest 7,392 in EDISON INTL on September 3, 2024 and sell it today you would earn a total of 922.00 from holding EDISON INTL or generate 12.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EDISON INTL vs. ITALIAN WINE BRANDS
Performance |
| Timeline |
| EDISON INTL |
| ITALIAN WINE BRANDS |
EDISON INTL and ITALIAN WINE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDISON INTL and ITALIAN WINE
The main advantage of trading using opposite EDISON INTL and ITALIAN WINE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDISON INTL position performs unexpectedly, ITALIAN WINE 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 ITALIAN WINE will offset losses from the drop in ITALIAN WINE's long position.| EDISON INTL vs. SEI INVESTMENTS | EDISON INTL vs. Gladstone Investment | EDISON INTL vs. Westlake Chemical | EDISON INTL vs. Japan Asia Investment |
| ITALIAN WINE vs. CHINA TONTINE WINES | ITALIAN WINE vs. Superior Plus Corp | ITALIAN WINE vs. NMI Holdings | ITALIAN WINE vs. Origin Agritech |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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