Correlation Between FirstEnergy and Ameren Corp
Can any of the company-specific risk be diversified away by investing in both FirstEnergy and Ameren Corp 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 FirstEnergy and Ameren Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FirstEnergy and Ameren Corp, you can compare the effects of market volatilities on FirstEnergy and Ameren Corp 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 FirstEnergy with a short position of Ameren Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstEnergy and Ameren Corp.
Diversification Opportunities for FirstEnergy and Ameren Corp
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between FirstEnergy and Ameren is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Ameren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Corp and FirstEnergy 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 FirstEnergy are associated (or correlated) with Ameren Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Corp has no effect on the direction of FirstEnergy i.e., FirstEnergy and Ameren Corp go up and down completely randomly.
Pair Corralation between FirstEnergy and Ameren Corp
Allowing for the 90-day total investment horizon FirstEnergy is expected to under-perform the Ameren Corp. But the stock apears to be less risky and, when comparing its historical volatility, FirstEnergy is 1.16 times less risky than Ameren Corp. The stock trades about -0.09 of its potential returns per unit of risk. The Ameren Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 8,202 in Ameren Corp on November 2, 2024 and sell it today you would earn a total of 1,209 from holding Ameren Corp or generate 14.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FirstEnergy vs. Ameren Corp
Performance |
| Timeline |
| FirstEnergy |
| Ameren Corp |
FirstEnergy and Ameren Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FirstEnergy and Ameren Corp
The main advantage of trading using opposite FirstEnergy and Ameren Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstEnergy position performs unexpectedly, Ameren Corp 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 Ameren Corp will offset losses from the drop in Ameren Corp's long position.| FirstEnergy vs. CenterPoint Energy | FirstEnergy vs. Pinnacle West Capital | FirstEnergy vs. Edison International | FirstEnergy vs. Public Service Enterprise |
| Ameren Corp vs. CMS Energy | Ameren Corp vs. Pinnacle West Capital | Ameren Corp vs. MGE Energy | Ameren Corp vs. Evergy, |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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