Correlation Between TRON and Edison International
Can any of the company-specific risk be diversified away by investing in both TRON 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 TRON and Edison International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TRON and Edison International, you can compare the effects of market volatilities on TRON 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 TRON with a short position of Edison International. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRON and Edison International.
Diversification Opportunities for TRON and Edison International
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between TRON and Edison is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding TRON and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International and TRON 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 TRON 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 TRON i.e., TRON and Edison International go up and down completely randomly.
Pair Corralation between TRON and Edison International
Assuming the 90 days trading horizon TRON is expected to generate 1.08 times more return on investment than Edison International. However, TRON is 1.08 times more volatile than Edison International. It trades about 0.02 of its potential returns per unit of risk. Edison International is currently generating about -0.23 per unit of risk. If you would invest 25.00 in TRON on October 20, 2024 and sell it today you would earn a total of 0.00 from holding TRON or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
TRON vs. Edison International
Performance |
| Timeline |
| TRON |
| Edison International |
TRON and Edison International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TRON and Edison International
The main advantage of trading using opposite TRON and Edison International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRON 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.The idea behind TRON and Edison International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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