Correlation Between Edison International and Exelon
Can any of the company-specific risk be diversified away by investing in both Edison International and Exelon 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 Exelon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edison International and Exelon, you can compare the effects of market volatilities on Edison International and Exelon 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 Exelon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edison International and Exelon.
Diversification Opportunities for Edison International and Exelon
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Edison and Exelon is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and Exelon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exelon 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 Exelon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exelon has no effect on the direction of Edison International i.e., Edison International and Exelon go up and down completely randomly.
Pair Corralation between Edison International and Exelon
Considering the 90-day investment horizon Edison International is expected to generate 0.94 times more return on investment than Exelon. However, Edison International is 1.06 times less risky than Exelon. It trades about 0.16 of its potential returns per unit of risk. Exelon is currently generating about 0.08 per unit of risk. If you would invest 7,190 in Edison International on August 27, 2024 and sell it today you would earn a total of 1,571 from holding Edison International or generate 21.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edison International vs. Exelon
Performance |
| Timeline |
| Edison International |
| Exelon |
Edison International and Exelon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edison International and Exelon
The main advantage of trading using opposite Edison International and Exelon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edison International position performs unexpectedly, Exelon 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 Exelon will offset losses from the drop in Exelon's long position.| Edison International vs. Southern Company | Edison International vs. American Electric Power | Edison International vs. Duke Energy | Edison International vs. Dominion Energy |
| Exelon vs. Duke Energy | Exelon vs. Dominion Energy | Exelon vs. Southern Company | Exelon vs. Consolidated Edison |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments |