Correlation Between Consolidated Edison and New Fortress

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

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

Diversification Opportunities for Consolidated Edison and New Fortress

-0.67

Correlation Coefficient

Consolidated Edison  New Fortress

Excellent diversification

The 3 months correlation between Consolidated and New is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and New Fortress Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Fortress Energy 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 New Fortress. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Fortress Energy has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and New Fortress go up and down completely randomly.

Pair Corralation between Consolidated Edison and New Fortress

Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 0.43 times more return on investment than New Fortress. However, Consolidated Edison is 2.35 times less risky than New Fortress. It trades about 0.19 of its potential returns per unit of risk. New Fortress Energy is currently generating about -0.09 per unit of risk. If you would invest  8,667  in Consolidated Edison on February 13, 2024 and sell it today you would earn a total of  1,103  from holding Consolidated Edison or generate 12.73% return on investment over 90 days.

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

Consolidated Edison  vs.  New Fortress Energy

Consolidated Edison

Risk-Adjusted Performance

14 of 100

Good

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

New Fortress Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Fortress Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental 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.

Pair Trading with Consolidated Edison and New Fortress

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

The idea behind Consolidated Edison and New Fortress Energy 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..