Correlation Between FirstEnergy and Algonquin Power
Can any of the company-specific risk be diversified away by investing in both FirstEnergy and Algonquin Power 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 Algonquin Power into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FirstEnergy and Algonquin Power Utilities, you can compare the effects of market volatilities on FirstEnergy and Algonquin Power 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 Algonquin Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstEnergy and Algonquin Power.
Diversification Opportunities for FirstEnergy and Algonquin Power
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between FirstEnergy and Algonquin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Algonquin Power Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algonquin Power Utilities 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 Algonquin Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algonquin Power Utilities has no effect on the direction of FirstEnergy i.e., FirstEnergy and Algonquin Power go up and down completely randomly.
Pair Corralation between FirstEnergy and Algonquin Power
Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 0.74 times more return on investment than Algonquin Power. However, FirstEnergy is 1.36 times less risky than Algonquin Power. It trades about 0.04 of its potential returns per unit of risk. Algonquin Power Utilities is currently generating about 0.03 per unit of risk. If you would invest 3,977 in FirstEnergy on November 9, 2024 and sell it today you would earn a total of 36.00 from holding FirstEnergy or generate 0.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FirstEnergy vs. Algonquin Power Utilities
Performance |
| Timeline |
| FirstEnergy |
| Algonquin Power Utilities |
FirstEnergy and Algonquin Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FirstEnergy and Algonquin Power
The main advantage of trading using opposite FirstEnergy and Algonquin Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstEnergy position performs unexpectedly, Algonquin Power 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 Algonquin Power will offset losses from the drop in Algonquin Power's long position.| FirstEnergy vs. CenterPoint Energy | FirstEnergy vs. Pinnacle West Capital | FirstEnergy vs. Edison International | FirstEnergy vs. Public Service Enterprise |
| Algonquin Power vs. Brookfield Renewable Corp | Algonquin Power vs. Nextera Energy Partners | Algonquin Power vs. Clearway Energy Class | Algonquin Power vs. Clearway Energy |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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