Correlation Between Genie Energy and Edison International

Can any of the company-specific risk be diversified away by investing in both Genie 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 Genie 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 Genie Energy and Edison International, you can compare the effects of market volatilities on Genie 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 Genie Energy with a short position of Edison International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genie Energy and Edison International.

Diversification Opportunities for Genie Energy and Edison International

-0.53

Correlation Coefficient

Genie Energy  Edison International

Excellent diversification

The 3 months correlation between Genie and Edison is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Genie Energy and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International and Genie 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 Genie Energy 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 Genie Energy i.e., Genie Energy and Edison International go up and down completely randomly.

Pair Corralation between Genie Energy and Edison International

Considering the 90-day investment horizon Genie Energy is expected to under-perform the Edison International. In addition to that, Genie Energy is 2.53 times more volatile than Edison International. It trades about -0.01 of its total potential returns per unit of risk. Edison International is currently generating about 0.25 per unit of volatility. If you would invest  7,106  in Edison International on March 1, 2024 and sell it today you would earn a total of  361.00  from holding Edison International or generate 5.08% return on investment over 90 days.

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

Genie Energy  vs.  Edison International

Genie Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genie Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Edison International

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edison International are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady forward indicators, Edison International may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Genie Energy and Edison International

The main advantage of trading using opposite Genie Energy and Edison International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genie 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 Genie Energy 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.