Correlation Between FirstEnergy and Allete
Can any of the company-specific risk be diversified away by investing in both FirstEnergy and Allete 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 Allete into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FirstEnergy and Allete Inc, you can compare the effects of market volatilities on FirstEnergy and Allete 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 Allete. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstEnergy and Allete.
Diversification Opportunities for FirstEnergy and Allete
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between FirstEnergy and Allete is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Allete Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allete Inc 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 Allete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allete Inc has no effect on the direction of FirstEnergy i.e., FirstEnergy and Allete go up and down completely randomly.
Pair Corralation between FirstEnergy and Allete
Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 4.4 times more return on investment than Allete. However, FirstEnergy is 4.4 times more volatile than Allete Inc. It trades about 0.09 of its potential returns per unit of risk. Allete Inc is currently generating about 0.37 per unit of risk. If you would invest 3,916 in FirstEnergy on October 20, 2024 and sell it today you would earn a total of 73.00 from holding FirstEnergy or generate 1.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FirstEnergy vs. Allete Inc
Performance |
| Timeline |
| FirstEnergy |
| Allete Inc |
FirstEnergy and Allete Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FirstEnergy and Allete
The main advantage of trading using opposite FirstEnergy and Allete positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstEnergy position performs unexpectedly, Allete 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 Allete will offset losses from the drop in Allete's long position.| FirstEnergy vs. CenterPoint Energy | FirstEnergy vs. Pinnacle West Capital | FirstEnergy vs. Edison International | FirstEnergy vs. Public Service Enterprise |
| Allete vs. Avista | Allete vs. Black Hills | Allete vs. Montauk Renewables | Allete vs. Companhia Paranaense de |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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