Correlation Between Tokyo Electric and First National
Can any of the company-specific risk be diversified away by investing in both Tokyo Electric and First National 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 Tokyo Electric and First National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tokyo Electric Power and First National Energy, you can compare the effects of market volatilities on Tokyo Electric and First National 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 Tokyo Electric with a short position of First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tokyo Electric and First National.
Diversification Opportunities for Tokyo Electric and First National
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Tokyo and First is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Tokyo Electric Power and First National Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Energy and Tokyo Electric 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 Tokyo Electric Power are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Energy has no effect on the direction of Tokyo Electric i.e., Tokyo Electric and First National go up and down completely randomly.
Pair Corralation between Tokyo Electric and First National
Assuming the 90 days horizon Tokyo Electric Power is expected to under-perform the First National. But the pink sheet apears to be less risky and, when comparing its historical volatility, Tokyo Electric Power is 2.71 times less risky than First National. The pink sheet trades about -0.34 of its potential returns per unit of risk. The First National Energy is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 4.71 in First National Energy on August 28, 2024 and sell it today you would earn a total of 4.35 from holding First National Energy or generate 92.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tokyo Electric Power vs. First National Energy
Performance |
| Timeline |
| Tokyo Electric Power |
| First National Energy |
Tokyo Electric and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tokyo Electric and First National
The main advantage of trading using opposite Tokyo Electric and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tokyo Electric position performs unexpectedly, First National 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 First National will offset losses from the drop in First National's long position.| Tokyo Electric vs. Alternus Energy Group | Tokyo Electric vs. First National Energy | Tokyo Electric vs. Verbund AG ADR | Tokyo Electric vs. Brookfield Renewable Corp |
| First National vs. TransAlta Corp | First National vs. Pampa Energia SA | First National vs. Vistra Energy Corp | First National vs. NRG 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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