Correlation Between Exelon and SCE Trust
Can any of the company-specific risk be diversified away by investing in both Exelon and SCE Trust 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 Exelon and SCE Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exelon and SCE Trust II, you can compare the effects of market volatilities on Exelon and SCE Trust 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 Exelon with a short position of SCE Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exelon and SCE Trust.
Diversification Opportunities for Exelon and SCE Trust
Poor diversification
The 3 months correlation between Exelon and SCE is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Exelon and SCE Trust II in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCE Trust II and Exelon 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 Exelon are associated (or correlated) with SCE Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCE Trust II has no effect on the direction of Exelon i.e., Exelon and SCE Trust go up and down completely randomly.
Pair Corralation between Exelon and SCE Trust
Considering the 90-day investment horizon Exelon is expected to under-perform the SCE Trust. In addition to that, Exelon is 1.69 times more volatile than SCE Trust II. It trades about -0.03 of its total potential returns per unit of risk. SCE Trust II is currently generating about -0.03 per unit of volatility. If you would invest 2,135 in SCE Trust II on August 31, 2024 and sell it today you would lose (19.00) from holding SCE Trust II or give up 0.89% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exelon vs. SCE Trust II
Performance |
| Timeline |
| Exelon |
| SCE Trust II |
Exelon and SCE Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exelon and SCE Trust
The main advantage of trading using opposite Exelon and SCE Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exelon position performs unexpectedly, SCE Trust 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 SCE Trust will offset losses from the drop in SCE Trust's long position.| Exelon vs. Duke Energy | Exelon vs. Dominion Energy | Exelon vs. Southern Company | Exelon vs. Consolidated Edison |
| SCE Trust vs. SCE Trust IV | SCE Trust vs. SCE Trust III | SCE Trust vs. SCE Trust VI | SCE Trust vs. State Street |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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