Correlation Between Edison International and CenterPoint Energy
Can any of the company-specific risk be diversified away by investing in both Edison International and CenterPoint 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 CenterPoint 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 CenterPoint Energy, you can compare the effects of market volatilities on Edison International and CenterPoint 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 CenterPoint Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edison International and CenterPoint Energy.
Diversification Opportunities for Edison International and CenterPoint Energy
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Edison and CenterPoint is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint 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 CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of Edison International i.e., Edison International and CenterPoint Energy go up and down completely randomly.
Pair Corralation between Edison International and CenterPoint Energy
Considering the 90-day investment horizon Edison International is expected to under-perform the CenterPoint Energy. In addition to that, Edison International is 3.3 times more volatile than CenterPoint Energy. It trades about -0.23 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about 0.11 per unit of volatility. If you would invest 3,176 in CenterPoint Energy on October 20, 2024 and sell it today you would earn a total of 80.00 from holding CenterPoint Energy or generate 2.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Edison International vs. CenterPoint Energy
Performance |
| Timeline |
| Edison International |
| CenterPoint Energy |
Edison International and CenterPoint Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edison International and CenterPoint Energy
The main advantage of trading using opposite Edison International and CenterPoint Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edison International position performs unexpectedly, CenterPoint 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 CenterPoint Energy will offset losses from the drop in CenterPoint Energy's long position.| Edison International vs. Southern Company | Edison International vs. American Electric Power | Edison International vs. Duke Energy | Edison International vs. Dominion Energy |
| CenterPoint Energy vs. DTE Energy | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Pinnacle West Capital |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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