Correlation Between Consolidated Edison and Duke Energy
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison 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 Consolidated Edison and Duke Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and Duke Energy, you can compare the effects of market volatilities on Consolidated Edison 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 Consolidated Edison with a short position of Duke Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and Duke Energy.
Diversification Opportunities for Consolidated Edison and Duke Energy
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Consolidated and Duke is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy and Consolidated Edison 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 Consolidated Edison 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 Consolidated Edison i.e., Consolidated Edison and Duke Energy go up and down completely randomly.
Pair Corralation between Consolidated Edison and Duke Energy
Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 1.29 times more return on investment than Duke Energy. However, Consolidated Edison is 1.29 times more volatile than Duke Energy. It trades about 0.08 of its potential returns per unit of risk. Duke Energy is currently generating about 0.03 per unit of risk. If you would invest 8,904 in Consolidated Edison on January 20, 2024 and sell it today you would earn a total of 186.00 from holding Consolidated Edison or generate 2.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Consolidated Edison vs. Duke Energy
Performance |
| Timeline |
| Consolidated Edison |
| Duke Energy |
Consolidated Edison and Duke Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and Duke Energy
The main advantage of trading using opposite Consolidated Edison and Duke Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison 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.| Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy | Consolidated Edison vs. Aquagold International | Consolidated Edison vs. Morningstar Unconstrained Allocation |
| Duke Energy vs. MGE Energy | Duke Energy vs. CMS Energy | Duke Energy vs. IDACORP | Duke Energy vs. Pinnacle West Capital |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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