Correlation Between FirstEnergy and Portland General
Can any of the company-specific risk be diversified away by investing in both FirstEnergy and Portland General 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 Portland General into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FirstEnergy and Portland General Electric, you can compare the effects of market volatilities on FirstEnergy and Portland General 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 Portland General. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstEnergy and Portland General.
Diversification Opportunities for FirstEnergy and Portland General
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FirstEnergy and Portland is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Portland General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portland General Electric 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 Portland General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portland General Electric has no effect on the direction of FirstEnergy i.e., FirstEnergy and Portland General go up and down completely randomly.
Pair Corralation between FirstEnergy and Portland General
Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 1.18 times less return on investment than Portland General. But when comparing it to its historical volatility, FirstEnergy is 1.2 times less risky than Portland General. It trades about 0.07 of its potential returns per unit of risk. Portland General Electric is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 3,951 in Portland General Electric on August 24, 2024 and sell it today you would earn a total of 809.00 from holding Portland General Electric or generate 20.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FirstEnergy vs. Portland General Electric
Performance |
| Timeline |
| FirstEnergy |
| Portland General Electric |
FirstEnergy and Portland General Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FirstEnergy and Portland General
The main advantage of trading using opposite FirstEnergy and Portland General positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstEnergy position performs unexpectedly, Portland General 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 Portland General will offset losses from the drop in Portland General's long position.| FirstEnergy vs. CenterPoint Energy | FirstEnergy vs. Pinnacle West Capital | FirstEnergy vs. Edison International | FirstEnergy vs. Public Service Enterprise |
| Portland General vs. MGE Energy | Portland General vs. CMS Energy | Portland General vs. OGE Energy | Portland General vs. DTE 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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