Correlation Between FirstEnergy and Utilities Portfolio
Can any of the company-specific risk be diversified away by investing in both FirstEnergy and Utilities Portfolio 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 Utilities Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FirstEnergy and Utilities Portfolio Utilities, you can compare the effects of market volatilities on FirstEnergy and Utilities Portfolio 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 Utilities Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstEnergy and Utilities Portfolio.
Diversification Opportunities for FirstEnergy and Utilities Portfolio
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FirstEnergy and Utilities is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Utilities Portfolio Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Portfolio 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 Utilities Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Portfolio has no effect on the direction of FirstEnergy i.e., FirstEnergy and Utilities Portfolio go up and down completely randomly.
Pair Corralation between FirstEnergy and Utilities Portfolio
Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 1.03 times more return on investment than Utilities Portfolio. However, FirstEnergy is 1.03 times more volatile than Utilities Portfolio Utilities. It trades about 0.05 of its potential returns per unit of risk. Utilities Portfolio Utilities is currently generating about 0.02 per unit of risk. If you would invest 3,927 in FirstEnergy on November 5, 2024 and sell it today you would earn a total of 53.00 from holding FirstEnergy or generate 1.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FirstEnergy vs. Utilities Portfolio Utilities
Performance |
| Timeline |
| FirstEnergy |
| Utilities Portfolio |
FirstEnergy and Utilities Portfolio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FirstEnergy and Utilities Portfolio
The main advantage of trading using opposite FirstEnergy and Utilities Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstEnergy position performs unexpectedly, Utilities Portfolio 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 Utilities Portfolio will offset losses from the drop in Utilities Portfolio's long position.| 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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