Correlation Between Ameren Corp and Consolidated Edison

Can any of the company-specific risk be diversified away by investing in both Ameren Corp 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 Ameren Corp and Consolidated Edison into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ameren Corp and Consolidated Edison, you can compare the effects of market volatilities on Ameren Corp 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 Ameren Corp with a short position of Consolidated Edison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameren Corp and Consolidated Edison.

Diversification Opportunities for Ameren Corp and Consolidated Edison

0.88

Correlation Coefficient

Ameren Corp  Consolidated Edison

Very poor diversification

The 3 months correlation between Ameren and Consolidated is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ameren Corp and Consolidated Edison in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Edison and Ameren Corp 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 Ameren Corp 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 Ameren Corp i.e., Ameren Corp and Consolidated Edison go up and down completely randomly.

Pair Corralation between Ameren Corp and Consolidated Edison

Considering the 90-day investment horizon Ameren Corp is expected to generate 1.81 times less return on investment than Consolidated Edison. But when comparing it to its historical volatility, Ameren Corp is 1.14 times less risky than Consolidated Edison. It trades about 0.15 of its potential returns per unit of risk. Consolidated Edison is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  8,837  in Consolidated Edison on December 30, 2024 and sell it today you would earn a total of  2,040  from holding Consolidated Edison or generate 23.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Ameren Corp  vs.  Consolidated Edison

Ameren Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ameren Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Ameren Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Consolidated Edison

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Edison are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting fundamental indicators, Consolidated Edison exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ameren Corp and Consolidated Edison

The main advantage of trading using opposite Ameren Corp and Consolidated Edison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameren Corp 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.

The idea behind Ameren Corp and Consolidated Edison 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.