Correlation Between Utilities Fund and FirstEnergy
Can any of the company-specific risk be diversified away by investing in both Utilities Fund and FirstEnergy 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 Utilities Fund and FirstEnergy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Utilities Fund Class and FirstEnergy, you can compare the effects of market volatilities on Utilities Fund and FirstEnergy 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 Utilities Fund with a short position of FirstEnergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Utilities Fund and FirstEnergy.
Diversification Opportunities for Utilities Fund and FirstEnergy
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Utilities and FirstEnergy is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Utilities Fund Class and FirstEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstEnergy and Utilities Fund 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 Utilities Fund Class are associated (or correlated) with FirstEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstEnergy has no effect on the direction of Utilities Fund i.e., Utilities Fund and FirstEnergy go up and down completely randomly.
Pair Corralation between Utilities Fund and FirstEnergy
Assuming the 90 days horizon Utilities Fund Class is expected to generate 1.06 times more return on investment than FirstEnergy. However, Utilities Fund is 1.06 times more volatile than FirstEnergy. It trades about -0.07 of its potential returns per unit of risk. FirstEnergy is currently generating about -0.16 per unit of risk. If you would invest 5,301 in Utilities Fund Class on September 12, 2024 and sell it today you would lose (72.00) from holding Utilities Fund Class or give up 1.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Utilities Fund Class vs. FirstEnergy
Performance |
| Timeline |
| Utilities Fund Class |
| FirstEnergy |
Utilities Fund and FirstEnergy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Utilities Fund and FirstEnergy
The main advantage of trading using opposite Utilities Fund and FirstEnergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Utilities Fund position performs unexpectedly, FirstEnergy 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 FirstEnergy will offset losses from the drop in FirstEnergy's long position.| Utilities Fund vs. Alpine Dynamic Dividend | Utilities Fund vs. The Gabelli Utilities | Utilities Fund vs. The Gabelli Equity | Utilities Fund vs. Hennessy Gas Utility |
| 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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