Correlation Between AES and Edison International

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

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

Diversification Opportunities for AES and Edison International

0.1

Correlation Coefficient

AES  Edison International

Average diversification

The 3 months correlation between AES and Edison is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International and AES 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 The AES are associated (or correlated) with Edison International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edison International has no effect on the direction of AES i.e., AES and Edison International go up and down completely randomly.

Pair Corralation between AES and Edison International

Considering the 90-day investment horizon The AES is expected to generate 1.98 times more return on investment than Edison International. However, AES is 1.98 times more volatile than Edison International. It trades about 0.1 of its potential returns per unit of risk. Edison International is currently generating about -0.02 per unit of risk. If you would invest  1,109  in The AES on May 20, 2025 and sell it today you would earn a total of  222.00  from holding The AES or generate 20.02% return on investment over 90 days.

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

The AES  vs.  Edison International

AES

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in The AES are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, AES unveiled solid returns over the last few months and may actually be approaching a breakup point.

Edison International

Risk-Adjusted Performance

Weakest

Over the last 90 days Edison International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Edison International is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AES and Edison International

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

The idea behind The AES and Edison International 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.