Correlation Between Edison International and PPL
Can any of the company-specific risk be diversified away by investing in both Edison International and PPL 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 PPL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edison International and PPL Corporation, you can compare the effects of market volatilities on Edison International and PPL 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 PPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edison International and PPL.
Diversification Opportunities for Edison International and PPL
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Edison and PPL is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation 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 PPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPL Corporation has no effect on the direction of Edison International i.e., Edison International and PPL go up and down completely randomly.
Pair Corralation between Edison International and PPL
Considering the 90-day investment horizon Edison International is expected to generate 1.21 times more return on investment than PPL. However, Edison International is 1.21 times more volatile than PPL Corporation. It trades about 0.02 of its potential returns per unit of risk. PPL Corporation is currently generating about 0.01 per unit of risk. If you would invest 6,436 in Edison International on January 24, 2024 and sell it today you would earn a total of 630.00 from holding Edison International or generate 9.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edison International vs. PPL Corp.
Performance |
| Timeline |
| Edison International |
| PPL Corporation |
Edison International and PPL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edison International and PPL
The main advantage of trading using opposite Edison International and PPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edison International position performs unexpectedly, PPL 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 PPL will offset losses from the drop in PPL's long position.| Edison International vs. Centrais Eltricas Brasileiras | Edison International vs. Central Puerto SA | Edison International vs. CMS Energy | Edison International vs. Centrais Electricas Brasileiras |
| PPL vs. Centrais Eltricas Brasileiras | PPL vs. Central Puerto SA | PPL vs. CMS Energy | PPL vs. Centrais Electricas Brasileiras |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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