Correlation Between Eversource Energy and Edison International
Can any of the company-specific risk be diversified away by investing in both Eversource Energy and Edison International 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 Eversource Energy and Edison International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eversource Energy and Edison International, you can compare the effects of market volatilities on Eversource Energy and Edison International 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 Eversource Energy with a short position of Edison International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eversource Energy and Edison International.
Diversification Opportunities for Eversource Energy and Edison International
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eversource and Edison is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International and Eversource Energy 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 Eversource Energy are associated (or correlated) with Edison International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edison International has no effect on the direction of Eversource Energy i.e., Eversource Energy and Edison International go up and down completely randomly.
Pair Corralation between Eversource Energy and Edison International
Allowing for the 90-day total investment horizon Eversource Energy is expected to generate 1.57 times less return on investment than Edison International. In addition to that, Eversource Energy is 1.19 times more volatile than Edison International. It trades about 0.08 of its total potential returns per unit of risk. Edison International is currently generating about 0.14 per unit of volatility. If you would invest 7,268 in Edison International on August 24, 2024 and sell it today you would earn a total of 1,441 from holding Edison International or generate 19.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eversource Energy vs. Edison International
Performance |
| Timeline |
| Eversource Energy |
| Edison International |
Eversource Energy and Edison International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eversource Energy and Edison International
The main advantage of trading using opposite Eversource Energy and Edison International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eversource Energy position performs unexpectedly, Edison International 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 Edison International will offset losses from the drop in Edison International's long position.| Eversource Energy vs. CenterPoint Energy | Eversource Energy vs. FirstEnergy | Eversource Energy vs. Pinnacle West Capital | Eversource Energy vs. Edison International |
| Edison International vs. Southern Company | Edison International vs. American Electric Power | Edison International vs. Duke Energy | Edison International vs. Dominion 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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