Correlation Between FirstEnergy and American States
Can any of the company-specific risk be diversified away by investing in both FirstEnergy and American States 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 American States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FirstEnergy and American States Water, you can compare the effects of market volatilities on FirstEnergy and American States 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 American States. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstEnergy and American States.
Diversification Opportunities for FirstEnergy and American States
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FirstEnergy and American is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and American States Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American States Water 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 American States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American States Water has no effect on the direction of FirstEnergy i.e., FirstEnergy and American States go up and down completely randomly.
Pair Corralation between FirstEnergy and American States
Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 0.83 times more return on investment than American States. However, FirstEnergy is 1.21 times less risky than American States. It trades about 0.02 of its potential returns per unit of risk. American States Water is currently generating about -0.01 per unit of risk. If you would invest 3,832 in FirstEnergy on August 28, 2024 and sell it today you would earn a total of 373.00 from holding FirstEnergy or generate 9.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FirstEnergy vs. American States Water
Performance |
| Timeline |
| FirstEnergy |
| American States Water |
FirstEnergy and American States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FirstEnergy and American States
The main advantage of trading using opposite FirstEnergy and American States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstEnergy position performs unexpectedly, American States 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 American States will offset losses from the drop in American States' long position.| FirstEnergy vs. CenterPoint Energy | FirstEnergy vs. Pinnacle West Capital | FirstEnergy vs. Edison International | FirstEnergy vs. Public Service Enterprise |
| American States vs. Middlesex Water | American States vs. SJW Group Common | American States vs. The York Water | American States vs. Artesian Resources |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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