Correlation Between Edison International and Equatorial Energia
Can any of the company-specific risk be diversified away by investing in both Edison International and Equatorial Energia 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 Equatorial Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edison International and Equatorial Energia SA, you can compare the effects of market volatilities on Edison International and Equatorial Energia 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 Equatorial Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edison International and Equatorial Energia.
Diversification Opportunities for Edison International and Equatorial Energia
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Edison and Equatorial is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and Equatorial Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equatorial Energia 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 Equatorial Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equatorial Energia has no effect on the direction of Edison International i.e., Edison International and Equatorial Energia go up and down completely randomly.
Pair Corralation between Edison International and Equatorial Energia
Considering the 90-day investment horizon Edison International is expected to generate 0.55 times more return on investment than Equatorial Energia. However, Edison International is 1.81 times less risky than Equatorial Energia. It trades about -0.03 of its potential returns per unit of risk. Equatorial Energia SA is currently generating about -0.03 per unit of risk. If you would invest 6,204 in Edison International on November 5, 2024 and sell it today you would lose (804.00) from holding Edison International or give up 12.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 85.37% |
| Values | Daily Returns |
Edison International vs. Equatorial Energia SA
Performance |
| Timeline |
| Edison International |
| Equatorial Energia |
Edison International and Equatorial Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edison International and Equatorial Energia
The main advantage of trading using opposite Edison International and Equatorial Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edison International position performs unexpectedly, Equatorial Energia 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 Equatorial Energia will offset losses from the drop in Equatorial Energia's long position.| Edison International vs. Southern Company | Edison International vs. American Electric Power | Edison International vs. Duke Energy | Edison International vs. Dominion Energy |
| Equatorial Energia vs. Dominion Energy | Equatorial Energia vs. Centrais Electricas Brasileiras | Equatorial Energia vs. Enel Chile SA | Equatorial Energia vs. Edison International |
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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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