Correlation Between Edison International and FirstEnergy

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

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

Diversification Opportunities for Edison International and FirstEnergy

0.62

Correlation Coefficient

Edison International  FirstEnergy

Poor diversification

The 3 months correlation between Edison and FirstEnergy is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and FirstEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstEnergy and Edison International 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 Edison International are associated (or correlated) with FirstEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstEnergy has no effect on the direction of Edison International i.e., Edison International and FirstEnergy go up and down completely randomly.

Pair Corralation between Edison International and FirstEnergy

Considering the 90-day investment horizon Edison International is expected to generate 1.59 times more return on investment than FirstEnergy. However, Edison International is 1.59 times more volatile than FirstEnergy. It trades about 0.11 of its potential returns per unit of risk. FirstEnergy is currently generating about 0.09 per unit of risk. If you would invest  5,249  in Edison International on September 6, 2025 and sell it today you would earn a total of  506.00  from holding Edison International or generate 9.64% return on investment over 90 days.

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

Edison International  vs.  FirstEnergy

Edison International

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Edison International are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Edison International may actually be approaching a critical reversion point that can send shares even higher in January 2026.

FirstEnergy

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in FirstEnergy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, FirstEnergy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Edison International and FirstEnergy

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

The idea behind Edison International and FirstEnergy 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.