Correlation Between Edison International and PGE

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

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

Diversification Opportunities for Edison International and PGE

0.97

Correlation Coefficient

Edison International  PGE

Almost no diversification

The 3 months correlation between Edison and PGE is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and PGE Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE Corporation and Edison International 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 Edison International are associated (or correlated) with PGE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corporation has no effect on the direction of Edison International i.e., Edison International and PGE go up and down completely randomly.

Pair Corralation between Edison International and PGE

Assuming the 90 days horizon Edison International is expected to under-perform the PGE. In addition to that, Edison International is 1.37 times more volatile than PGE Corporation. It trades about -0.17 of its total potential returns per unit of risk. PGE Corporation is currently generating about -0.12 per unit of volatility. If you would invest  1,906  in PGE Corporation on December 27, 2024 and sell it today you would lose (330.00) from holding PGE Corporation or give up 17.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

Edison International  vs.  PGE Corp.

Edison International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edison International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PGE Corporation

Risk-Adjusted Performance

Very Weak

Over the last 90 days PGE Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Edison International and PGE

The main advantage of trading using opposite Edison International and PGE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edison International position performs unexpectedly, PGE 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 PGE will offset losses from the drop in PGE's long position.

The idea behind Edison International and PGE Corporation 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.