Correlation Between MGE Energy and Consolidated Edison
Can any of the company-specific risk be diversified away by investing in both MGE Energy and Consolidated Edison 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 MGE Energy and Consolidated Edison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGE Energy and Consolidated Edison, you can compare the effects of market volatilities on MGE Energy and Consolidated Edison 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 MGE Energy with a short position of Consolidated Edison. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGE Energy and Consolidated Edison.
Diversification Opportunities for MGE Energy and Consolidated Edison
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between MGE and Consolidated is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding MGE Energy and Consolidated Edison in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Edison and MGE 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 MGE Energy are associated (or correlated) with Consolidated Edison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Edison has no effect on the direction of MGE Energy i.e., MGE Energy and Consolidated Edison go up and down completely randomly.
Pair Corralation between MGE Energy and Consolidated Edison
Given the investment horizon of 90 days MGE Energy is expected to generate 2.36 times more return on investment than Consolidated Edison. However, MGE Energy is 2.36 times more volatile than Consolidated Edison. It trades about 0.29 of its potential returns per unit of risk. Consolidated Edison is currently generating about -0.21 per unit of risk. If you would invest 9,169 in MGE Energy on August 28, 2024 and sell it today you would earn a total of 1,306 from holding MGE Energy or generate 14.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MGE Energy vs. Consolidated Edison
Performance |
| Timeline |
| MGE Energy |
| Consolidated Edison |
MGE Energy and Consolidated Edison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MGE Energy and Consolidated Edison
The main advantage of trading using opposite MGE Energy and Consolidated Edison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGE Energy position performs unexpectedly, Consolidated Edison 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 Consolidated Edison will offset losses from the drop in Consolidated Edison's long position.| MGE Energy vs. CMS Energy | MGE Energy vs. Ameren Corp | MGE Energy vs. Pinnacle West Capital | MGE Energy vs. Evergy, |
| Consolidated Edison vs. Duke Energy | Consolidated Edison vs. Dominion Energy | Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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