Correlation Between DATAGROUP and EDISON INTL

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

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

Diversification Opportunities for DATAGROUP and EDISON INTL

0.61

Correlation Coefficient

DATAGROUP  EDISON INTL

Poor diversification

The 3 months correlation between DATAGROUP and EDISON is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding DATAGROUP SE and EDISON INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDISON INTL and DATAGROUP 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 DATAGROUP SE are associated (or correlated) with EDISON INTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDISON INTL has no effect on the direction of DATAGROUP i.e., DATAGROUP and EDISON INTL go up and down completely randomly.

Pair Corralation between DATAGROUP and EDISON INTL

Assuming the 90 days trading horizon DATAGROUP SE is expected to under-perform the EDISON INTL. In addition to that, DATAGROUP is 1.85 times more volatile than EDISON INTL. It trades about -0.01 of its total potential returns per unit of risk. EDISON INTL is currently generating about 0.09 per unit of volatility. If you would invest  6,056  in EDISON INTL on September 15, 2024 and sell it today you would earn a total of  1,688  from holding EDISON INTL or generate 27.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

DATAGROUP SE  vs.  EDISON INTL

DATAGROUP SE

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DATAGROUP SE are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, DATAGROUP unveiled solid returns over the last few months and may actually be approaching a breakup point.

EDISON INTL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EDISON INTL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, EDISON INTL is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with DATAGROUP and EDISON INTL

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

The idea behind DATAGROUP SE and EDISON INTL 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.