Correlation Between Consolidated Edison and Avangrid

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

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

Diversification Opportunities for Consolidated Edison and Avangrid

-0.48

Correlation Coefficient

Consolidated Edison  Avangrid

Very good diversification

The 3 months correlation between Consolidated and Avangrid is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and Avangrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avangrid 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 Avangrid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avangrid has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and Avangrid go up and down completely randomly.

Pair Corralation between Consolidated Edison and Avangrid

Allowing for the 90-day total investment horizon Consolidated Edison is expected to under-perform the Avangrid. In addition to that, Consolidated Edison is 5.13 times more volatile than Avangrid. It trades about -0.17 of its total potential returns per unit of risk. Avangrid is currently generating about 0.07 per unit of volatility. If you would invest  3,526  in Avangrid on September 14, 2024 and sell it today you would earn a total of  30.00  from holding Avangrid or generate 0.85% return on investment over 90 days.

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

Consolidated Edison  vs.  Avangrid

Consolidated Edison

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consolidated Edison has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Avangrid

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avangrid are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Avangrid is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Consolidated Edison and Avangrid

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

The idea behind Consolidated Edison and Avangrid 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.