Correlation Between Edison International and Apple
Can any of the company-specific risk be diversified away by investing in both Edison International and Apple 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 International and Apple into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edison International and Apple Inc, you can compare the effects of market volatilities on Edison International and Apple 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 International with a short position of Apple. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edison International and Apple.
Diversification Opportunities for Edison International and Apple
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Edison and Apple is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc and Edison International 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 International are associated (or correlated) with Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of Edison International i.e., Edison International and Apple go up and down completely randomly.
Pair Corralation between Edison International and Apple
Assuming the 90 days horizon Edison International is expected to generate 0.85 times more return on investment than Apple. However, Edison International is 1.18 times less risky than Apple. It trades about 0.28 of its potential returns per unit of risk. Apple Inc is currently generating about 0.19 per unit of risk. If you would invest 7,710 in Edison International on August 31, 2024 and sell it today you would earn a total of 562.00 from holding Edison International or generate 7.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Edison International vs. Apple Inc
Performance |
| Timeline |
| Edison International |
| Apple Inc |
Edison International and Apple Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edison International and Apple
The main advantage of trading using opposite Edison International and Apple positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edison International position performs unexpectedly, Apple 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 Apple will offset losses from the drop in Apple's long position.| Edison International vs. Waste Management | Edison International vs. Western Copper and | Edison International vs. SERI INDUSTRIAL EO | Edison International vs. Q2M Managementberatung AG |
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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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