Correlation Between Fortis and Edison International

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

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

Diversification Opportunities for Fortis and Edison International

-0.64

Correlation Coefficient

Fortis  Edison International

Excellent diversification

The 3 months correlation between Fortis and Edison is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fortis Inc and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International and Fortis 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 Fortis 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 Fortis i.e., Fortis and Edison International go up and down completely randomly.

Pair Corralation between Fortis and Edison International

Considering the 90-day investment horizon Fortis Inc is expected to generate 0.32 times more return on investment than Edison International. However, Fortis Inc is 3.1 times less risky than Edison International. It trades about 0.14 of its potential returns per unit of risk. Edison International is currently generating about -0.16 per unit of risk. If you would invest  4,129  in Fortis Inc on December 28, 2024 and sell it today you would earn a total of  345.00  from holding Fortis Inc or generate 8.36% return on investment over 90 days.

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

Fortis Inc  vs.  Edison International

Fortis Inc

Risk-Adjusted Performance

Good

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

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.

Pair Trading with Fortis and Edison International

The main advantage of trading using opposite Fortis and Edison International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortis 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 Fortis 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.