Correlation Between Alliant Energy and Edison International

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

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

Diversification Opportunities for Alliant Energy and Edison International

-0.57

Correlation Coefficient

Alliant Energy  Edison International

Excellent diversification

The 3 months correlation between Alliant and Edison is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Alliant Energy Corp and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International and Alliant Energy 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 Alliant Energy Corp 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 Alliant Energy i.e., Alliant Energy and Edison International go up and down completely randomly.

Pair Corralation between Alliant Energy and Edison International

Considering the 90-day investment horizon Alliant Energy Corp is expected to generate 0.4 times more return on investment than Edison International. However, Alliant Energy Corp is 2.5 times less risky than Edison International. It trades about 0.11 of its potential returns per unit of risk. Edison International is currently generating about -0.15 per unit of risk. If you would invest  5,882  in Alliant Energy Corp on December 28, 2024 and sell it today you would earn a total of  476.00  from holding Alliant Energy Corp or generate 8.09% return on investment over 90 days.

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

Alliant Energy Corp  vs.  Edison International

Alliant Energy Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alliant Energy Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Alliant Energy 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 Alliant Energy and Edison International

The main advantage of trading using opposite Alliant Energy and Edison International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliant Energy 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 Alliant Energy Corp 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.