Correlation Between Edison International and Duke Energy

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

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

Diversification Opportunities for Edison International and Duke Energy

-0.65

Correlation Coefficient

Edison International  Duke Energy

Excellent diversification

The 3 months correlation between Edison and Duke is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy 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 Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of Edison International i.e., Edison International and Duke Energy go up and down completely randomly.

Pair Corralation between Edison International and Duke Energy

Considering the 90-day investment horizon Edison International is expected to under-perform the Duke Energy. In addition to that, Edison International is 2.65 times more volatile than Duke Energy. It trades about -0.16 of its total potential returns per unit of risk. Duke Energy is currently generating about 0.15 per unit of volatility. If you would invest  10,672  in Duke Energy on December 28, 2024 and sell it today you would earn a total of  1,093  from holding Duke Energy or generate 10.24% return on investment over 90 days.

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

Edison International  vs.  Duke Energy

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. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Duke Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Duke Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Duke Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Edison International and Duke Energy

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

The idea behind Edison International and Duke Energy 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 Valuation module to check real value of public entities based on technical and fundamental data.