Correlation Between CenterPoint Energy and FirstEnergy
Can any of the company-specific risk be diversified away by investing in both CenterPoint Energy 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 CenterPoint Energy and FirstEnergy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CenterPoint Energy and FirstEnergy, you can compare the effects of market volatilities on CenterPoint Energy 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 CenterPoint Energy with a short position of FirstEnergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and FirstEnergy.
Diversification Opportunities for CenterPoint Energy and FirstEnergy
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CenterPoint and FirstEnergy is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and FirstEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstEnergy and CenterPoint Energy 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 CenterPoint Energy 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 CenterPoint Energy i.e., CenterPoint Energy and FirstEnergy go up and down completely randomly.
Pair Corralation between CenterPoint Energy and FirstEnergy
Considering the 90-day investment horizon CenterPoint Energy is expected to generate 1.12 times more return on investment than FirstEnergy. However, CenterPoint Energy is 1.12 times more volatile than FirstEnergy. It trades about 0.02 of its potential returns per unit of risk. FirstEnergy is currently generating about 0.02 per unit of risk. If you would invest 2,915 in CenterPoint Energy on August 27, 2024 and sell it today you would earn a total of 278.00 from holding CenterPoint Energy or generate 9.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CenterPoint Energy vs. FirstEnergy
Performance |
| Timeline |
| CenterPoint Energy |
| FirstEnergy |
CenterPoint Energy and FirstEnergy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CenterPoint Energy and FirstEnergy
The main advantage of trading using opposite CenterPoint Energy and FirstEnergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy 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.| CenterPoint Energy vs. Entergy | CenterPoint Energy vs. Ameren Corp | CenterPoint Energy vs. Alliant Energy Corp | CenterPoint Energy vs. Pinnacle West Capital |
| FirstEnergy vs. CenterPoint Energy | FirstEnergy vs. Pinnacle West Capital | FirstEnergy vs. Edison International | FirstEnergy vs. Public Service Enterprise |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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