Correlation Between FirstEnergy and SCE Trust
Can any of the company-specific risk be diversified away by investing in both FirstEnergy and SCE Trust 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 SCE Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FirstEnergy and SCE Trust VIII, you can compare the effects of market volatilities on FirstEnergy and SCE Trust 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 SCE Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstEnergy and SCE Trust.
Diversification Opportunities for FirstEnergy and SCE Trust
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between FirstEnergy and SCE is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and SCE Trust VIII in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCE Trust VIII 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 SCE Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCE Trust VIII has no effect on the direction of FirstEnergy i.e., FirstEnergy and SCE Trust go up and down completely randomly.
Pair Corralation between FirstEnergy and SCE Trust
Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 1.7 times more return on investment than SCE Trust. However, FirstEnergy is 1.7 times more volatile than SCE Trust VIII. It trades about 0.03 of its potential returns per unit of risk. SCE Trust VIII is currently generating about -0.05 per unit of risk. If you would invest 4,239 in FirstEnergy on August 30, 2024 and sell it today you would earn a total of 23.00 from holding FirstEnergy or generate 0.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
FirstEnergy vs. SCE Trust VIII
Performance |
| Timeline |
| FirstEnergy |
| SCE Trust VIII |
FirstEnergy and SCE Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FirstEnergy and SCE Trust
The main advantage of trading using opposite FirstEnergy and SCE Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstEnergy position performs unexpectedly, SCE Trust 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 SCE Trust will offset losses from the drop in SCE Trust's long position.| FirstEnergy vs. DTE Energy | FirstEnergy vs. Ameren Corp | FirstEnergy vs. CenterPoint Energy | FirstEnergy vs. Pinnacle West Capital |
| SCE Trust vs. Dominion Energy | SCE Trust vs. Consolidated Edison | SCE Trust vs. Eversource Energy | SCE Trust vs. FirstEnergy |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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