Correlation Between PNM Resources and Edison International
Can any of the company-specific risk be diversified away by investing in both PNM Resources 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 PNM Resources and Edison International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PNM Resources and Edison International, you can compare the effects of market volatilities on PNM Resources 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 PNM Resources with a short position of Edison International. Check out your portfolio center. Please also check ongoing floating volatility patterns of PNM Resources and Edison International.
Diversification Opportunities for PNM Resources and Edison International
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PNM and Edison is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding PNM Resources and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International and PNM Resources 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 PNM Resources 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 PNM Resources i.e., PNM Resources and Edison International go up and down completely randomly.
Pair Corralation between PNM Resources and Edison International
Considering the 90-day investment horizon PNM Resources is expected to under-perform the Edison International. But the stock apears to be less risky and, when comparing its historical volatility, PNM Resources is 1.21 times less risky than Edison International. The stock trades about -0.01 of its potential returns per unit of risk. The Edison International is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 6,291 in Edison International on August 27, 2024 and sell it today you would earn a total of 2,357 from holding Edison International or generate 37.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 92.31% |
| Values | Daily Returns |
PNM Resources vs. Edison International
Performance |
| Timeline |
| PNM Resources |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Edison International |
PNM Resources and Edison International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PNM Resources and Edison International
The main advantage of trading using opposite PNM Resources and Edison International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PNM Resources 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.| PNM Resources vs. Portland General Electric | PNM Resources vs. MGE Energy | PNM Resources vs. CMS Energy | PNM Resources vs. OGE Energy |
| 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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