Correlation Between Edison International and Pacific Gas

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

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

Diversification Opportunities for Edison International and Pacific Gas

-0.06

Correlation Coefficient

Edison International  Pacific Gas

Good diversification

The 3 months correlation between Edison and Pacific is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and Pacific Gas and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific Gas 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 Pacific Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific Gas has no effect on the direction of Edison International i.e., Edison International and Pacific Gas go up and down completely randomly.

Pair Corralation between Edison International and Pacific Gas

Considering the 90-day investment horizon Edison International is expected to under-perform the Pacific Gas. In addition to that, Edison International is 1.16 times more volatile than Pacific Gas and. It trades about -0.15 of its total potential returns per unit of risk. Pacific Gas and is currently generating about -0.08 per unit of volatility. If you would invest  2,058  in Pacific Gas and on December 29, 2024 and sell it today you would lose (148.00) from holding Pacific Gas and or give up 7.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	49.18%
Values	Daily Returns

Edison International  vs.  Pacific Gas and

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.

Pacific Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific Gas and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Preferred Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Edison International and Pacific Gas

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

The idea behind Edison International and Pacific Gas and 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.