Correlation Between Apple and Edison International

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

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

Diversification Opportunities for Apple and Edison International

0.67

Correlation Coefficient

Apple  Edison International

Poor diversification

The 3 months correlation between Apple and Edison is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International and Apple 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 Apple Inc 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 Apple i.e., Apple and Edison International go up and down completely randomly.

Pair Corralation between Apple and Edison International

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.96 times more return on investment than Edison International. However, Apple Inc is 1.05 times less risky than Edison International. It trades about 0.27 of its potential returns per unit of risk. Edison International is currently generating about 0.02 per unit of risk. If you would invest  19,403  in Apple Inc on September 14, 2024 and sell it today you would earn a total of  4,287  from holding Apple Inc or generate 22.09% return on investment over 90 days.

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

Apple Inc  vs.  Edison International

Apple Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile fundamental indicators, Apple displayed solid returns over the last few months and may actually be approaching a breakup point.

Edison International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Edison International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Edison International is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Apple and Edison International

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

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.