Correlation Between Edison International and NextEra Energy
Can any of the company-specific risk be diversified away by investing in both Edison International and NextEra Energy 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 NextEra Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edison International and NextEra Energy, you can compare the effects of market volatilities on Edison International and NextEra Energy 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 NextEra Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edison International and NextEra Energy.
Diversification Opportunities for Edison International and NextEra Energy
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Edison and NextEra is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and NextEra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextEra Energy 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 NextEra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextEra Energy has no effect on the direction of Edison International i.e., Edison International and NextEra Energy go up and down completely randomly.
Pair Corralation between Edison International and NextEra Energy
Assuming the 90 days horizon Edison International is expected to generate 0.68 times more return on investment than NextEra Energy. However, Edison International is 1.47 times less risky than NextEra Energy. It trades about 0.26 of its potential returns per unit of risk. NextEra Energy is currently generating about 0.05 per unit of risk. If you would invest 7,780 in Edison International on August 27, 2024 and sell it today you would earn a total of 514.00 from holding Edison International or generate 6.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edison International vs. NextEra Energy
Performance |
| Timeline |
| Edison International |
| NextEra Energy |
Edison International and NextEra Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edison International and NextEra Energy
The main advantage of trading using opposite Edison International and NextEra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edison International position performs unexpectedly, NextEra Energy 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 NextEra Energy will offset losses from the drop in NextEra Energy's long position.| Edison International vs. ZANAGA IRON ORE | Edison International vs. Perma Fix Environmental Services | Edison International vs. Tencent Music Entertainment | Edison International vs. EIDESVIK OFFSHORE NK |
| NextEra Energy vs. GREENX METALS LTD | NextEra Energy vs. Evolution Mining Limited | NextEra Energy vs. ADRIATIC METALS LS 013355 | NextEra Energy vs. Microchip Technology Incorporated |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |