Correlation Between Consolidated Edison and Mfs Utilities

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

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

Diversification Opportunities for Consolidated Edison and Mfs Utilities

0.84

Correlation Coefficient

Consolidated Edison  Mfs Utilities

Very poor diversification

The 3 months correlation between Consolidated and Mfs is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and Mfs Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Utilities 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 Mfs Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Utilities has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and Mfs Utilities go up and down completely randomly.

Pair Corralation between Consolidated Edison and Mfs Utilities

Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 1.26 times more return on investment than Mfs Utilities. However, Consolidated Edison is 1.26 times more volatile than Mfs Utilities Fund. It trades about 0.24 of its potential returns per unit of risk. Mfs Utilities Fund is currently generating about 0.17 per unit of risk. If you would invest  8,989  in Consolidated Edison on February 3, 2024 and sell it today you would earn a total of  567.00  from holding Consolidated Edison or generate 6.31% return on investment over 90 days.

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

Consolidated Edison  vs.  Mfs Utilities Fund

Consolidated Edison

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Edison are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Consolidated Edison may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Mfs Utilities

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Utilities Fund are ranked lower than 12 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Mfs Utilities may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Consolidated Edison and Mfs Utilities

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

The idea behind Consolidated Edison and Mfs Utilities Fund 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.