Correlation Between Eversource Energy and FirstEnergy
Can any of the company-specific risk be diversified away by investing in both Eversource 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 Eversource Energy and FirstEnergy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eversource Energy and FirstEnergy, you can compare the effects of market volatilities on Eversource 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 Eversource Energy with a short position of FirstEnergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eversource Energy and FirstEnergy.
Diversification Opportunities for Eversource Energy and FirstEnergy
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Eversource and FirstEnergy is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy and FirstEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstEnergy and Eversource 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 Eversource 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 Eversource Energy i.e., Eversource Energy and FirstEnergy go up and down completely randomly.
Pair Corralation between Eversource Energy and FirstEnergy
Allowing for the 90-day total investment horizon Eversource Energy is expected to under-perform the FirstEnergy. In addition to that, Eversource Energy is 1.58 times more volatile than FirstEnergy. It trades about -0.12 of its total potential returns per unit of risk. FirstEnergy is currently generating about -0.14 per unit of volatility. If you would invest 4,323 in FirstEnergy on August 28, 2024 and sell it today you would lose (118.00) from holding FirstEnergy or give up 2.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eversource Energy vs. FirstEnergy
Performance |
| Timeline |
| Eversource Energy |
| FirstEnergy |
Eversource Energy and FirstEnergy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eversource Energy and FirstEnergy
The main advantage of trading using opposite Eversource Energy and FirstEnergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eversource 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.| Eversource Energy vs. CenterPoint Energy | Eversource Energy vs. FirstEnergy | Eversource Energy vs. Pinnacle West Capital | Eversource Energy vs. Edison International |
| 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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