Correlation Between Pacific Gas and Consolidated Edison

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

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

Diversification Opportunities for Pacific Gas and Consolidated Edison

-0.17

Correlation Coefficient

Pacific Gas  Consolidated Edison

Good diversification

The 3 months correlation between Pacific and Consolidated is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Gas and and Consolidated Edison in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Edison and Pacific Gas 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 Pacific Gas and are associated (or correlated) with Consolidated Edison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Edison has no effect on the direction of Pacific Gas i.e., Pacific Gas and Consolidated Edison go up and down completely randomly.

Pair Corralation between Pacific Gas and Consolidated Edison

Assuming the 90 days trading horizon Pacific Gas and is expected to under-perform the Consolidated Edison. But the preferred stock apears to be less risky and, when comparing its historical volatility, Pacific Gas and is 1.68 times less risky than Consolidated Edison. The preferred stock trades about -0.05 of its potential returns per unit of risk. The Consolidated Edison is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9,081  in Consolidated Edison on January 28, 2024 and sell it today you would earn a total of  212.00  from holding Consolidated Edison or generate 2.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Pacific Gas and  vs.  Consolidated Edison

Pacific Gas

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pacific Gas and are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Pacific Gas is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Consolidated Edison

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Edison are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Consolidated Edison is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pacific Gas and Consolidated Edison

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

The idea behind Pacific Gas and and Consolidated Edison 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.