Correlation Between Consolidated Edison and WEC Energy

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

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

Diversification Opportunities for Consolidated Edison and WEC Energy

-0.17

Correlation Coefficient

Consolidated Edison  WEC Energy

Good diversification

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

Pair Corralation between Consolidated Edison and WEC Energy

Allowing for the 90-day total investment horizon Consolidated Edison is expected to under-perform the WEC Energy. In addition to that, Consolidated Edison is 1.13 times more volatile than WEC Energy Group. It trades about -0.16 of its total potential returns per unit of risk. WEC Energy Group is currently generating about 0.02 per unit of volatility. If you would invest  9,503  in WEC Energy Group on September 13, 2024 and sell it today you would earn a total of  83.00  from holding WEC Energy Group or generate 0.87% return on investment over 90 days.

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

Consolidated Edison  vs.  WEC Energy Group

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.

WEC Energy Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WEC Energy Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, WEC Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Consolidated Edison and WEC Energy

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

The idea behind Consolidated Edison and WEC Energy Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.