Correlation Between Cleanaway Waste and EDISON INTL

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

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

Diversification Opportunities for Cleanaway Waste and EDISON INTL

0.32

Correlation Coefficient

Cleanaway Waste  EDISON INTL

Weak diversification

The 3 months correlation between Cleanaway and EDISON is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cleanaway Waste Management and EDISON INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDISON INTL and Cleanaway Waste 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 Cleanaway Waste Management 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 Cleanaway Waste i.e., Cleanaway Waste and EDISON INTL go up and down completely randomly.

Pair Corralation between Cleanaway Waste and EDISON INTL

Assuming the 90 days trading horizon Cleanaway Waste Management is expected to under-perform the EDISON INTL. In addition to that, Cleanaway Waste is 1.95 times more volatile than EDISON INTL. It trades about -0.05 of its total potential returns per unit of risk. EDISON INTL is currently generating about 0.02 per unit of volatility. If you would invest  7,722  in EDISON INTL on September 15, 2024 and sell it today you would earn a total of  22.00  from holding EDISON INTL or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Cleanaway Waste Management  vs.  EDISON INTL

Cleanaway Waste Mana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cleanaway Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Cleanaway Waste is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

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 Cleanaway Waste and EDISON INTL

The main advantage of trading using opposite Cleanaway Waste and EDISON INTL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cleanaway Waste 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 Cleanaway Waste Management 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.