Correlation Between Edison International and China Power
Can any of the company-specific risk be diversified away by investing in both Edison International and China Power 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 China Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edison International and China Power International, you can compare the effects of market volatilities on Edison International and China Power 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 China Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edison International and China Power.
Diversification Opportunities for Edison International and China Power
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Edison and China is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and China Power International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Power International 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 China Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Power International has no effect on the direction of Edison International i.e., Edison International and China Power go up and down completely randomly.
Pair Corralation between Edison International and China Power
If you would invest 8,448 in Edison International on August 27, 2024 and sell it today you would earn a total of 200.00 from holding Edison International or generate 2.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 4.76% |
| Values | Daily Returns |
Edison International vs. China Power International
Performance |
| Timeline |
| Edison International |
| China Power International |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Edison International and China Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edison International and China Power
The main advantage of trading using opposite Edison International and China Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edison International position performs unexpectedly, China Power 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 China Power will offset losses from the drop in China Power's long position.| Edison International vs. Southern Company | Edison International vs. American Electric Power | Edison International vs. Duke Energy | Edison International vs. Dominion Energy |
| China Power vs. Southern Company | China Power vs. Edison International | China Power vs. American Electric Power | China Power vs. Duke Energy |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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