Correlation Between FirstEnergy and Prudential Utility
Can any of the company-specific risk be diversified away by investing in both FirstEnergy and Prudential Utility 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 Prudential Utility into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FirstEnergy and Prudential Utility Fund, you can compare the effects of market volatilities on FirstEnergy and Prudential Utility 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 Prudential Utility. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstEnergy and Prudential Utility.
Diversification Opportunities for FirstEnergy and Prudential Utility
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FirstEnergy and Prudential is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Prudential Utility Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prudential Utility 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 Prudential Utility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prudential Utility has no effect on the direction of FirstEnergy i.e., FirstEnergy and Prudential Utility go up and down completely randomly.
Pair Corralation between FirstEnergy and Prudential Utility
Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 2.25 times less return on investment than Prudential Utility. But when comparing it to its historical volatility, FirstEnergy is 1.2 times less risky than Prudential Utility. It trades about 0.08 of its potential returns per unit of risk. Prudential Utility Fund is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,476 in Prudential Utility Fund on September 1, 2024 and sell it today you would earn a total of 291.00 from holding Prudential Utility Fund or generate 19.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.21% |
| Values | Daily Returns |
FirstEnergy vs. Prudential Utility Fund
Performance |
| Timeline |
| FirstEnergy |
| Prudential Utility |
FirstEnergy and Prudential Utility Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FirstEnergy and Prudential Utility
The main advantage of trading using opposite FirstEnergy and Prudential Utility positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstEnergy position performs unexpectedly, Prudential Utility 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 Prudential Utility will offset losses from the drop in Prudential Utility's long position.| FirstEnergy vs. MGE Energy | FirstEnergy vs. CMS Energy | FirstEnergy vs. OGE Energy | FirstEnergy vs. DTE Energy |
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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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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