Correlation Between SWISS WATER and Edison International

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

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

Diversification Opportunities for SWISS WATER and Edison International

-0.45

Correlation Coefficient

SWISS WATER  Edison International

Very good diversification

The 3 months correlation between SWISS and Edison is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding SWISS WATER DECAFFCOFFEE and Edison International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edison International and SWISS WATER 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 SWISS WATER DECAFFCOFFEE 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 SWISS WATER i.e., SWISS WATER and Edison International go up and down completely randomly.

Pair Corralation between SWISS WATER and Edison International

Assuming the 90 days horizon SWISS WATER DECAFFCOFFEE is expected to generate 1.83 times more return on investment than Edison International. However, SWISS WATER is 1.83 times more volatile than Edison International. It trades about 0.13 of its potential returns per unit of risk. Edison International is currently generating about -0.09 per unit of risk. If you would invest  202.00  in SWISS WATER DECAFFCOFFEE on April 24, 2025 and sell it today you would earn a total of  62.00  from holding SWISS WATER DECAFFCOFFEE or generate 30.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

SWISS WATER DECAFFCOFFEE  vs.  Edison International

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SWISS WATER reported solid returns over the last few months and may actually be approaching a breakup point.

Edison International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edison International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with SWISS WATER and Edison International

The main advantage of trading using opposite SWISS WATER and Edison International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SWISS WATER 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 SWISS WATER DECAFFCOFFEE 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.

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.