Correlation Between Firsthand Alternative and Vanguard Energy

Can any of the company-specific risk be diversified away by investing in both Firsthand Alternative and Vanguard Energy 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 Firsthand Alternative and Vanguard Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Firsthand Alternative Energy and Vanguard Energy Index, you can compare the effects of market volatilities on Firsthand Alternative and Vanguard Energy 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 Firsthand Alternative with a short position of Vanguard Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Firsthand Alternative and Vanguard Energy.

Diversification Opportunities for Firsthand Alternative and Vanguard Energy

0.2

Correlation Coefficient

Firsthand Alternative  Vanguard Energy

Modest diversification

The 3 months correlation between Firsthand and Vanguard is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Firsthand Alternative Energy and Vanguard Energy Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Energy Index and Firsthand Alternative 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 Firsthand Alternative Energy are associated (or correlated) with Vanguard Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Energy Index has no effect on the direction of Firsthand Alternative i.e., Firsthand Alternative and Vanguard Energy go up and down completely randomly.

Pair Corralation between Firsthand Alternative and Vanguard Energy

Assuming the 90 days horizon Firsthand Alternative Energy is expected to generate 1.47 times more return on investment than Vanguard Energy. However, Firsthand Alternative is 1.47 times more volatile than Vanguard Energy Index. It trades about 0.01 of its potential returns per unit of risk. Vanguard Energy Index is currently generating about -0.12 per unit of risk. If you would invest  995.00  in Firsthand Alternative Energy on October 7, 2024 and sell it today you would earn a total of  0.00  from holding Firsthand Alternative Energy or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Firsthand Alternative Energy  vs.  Vanguard Energy Index

Firsthand Alternative

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Firsthand Alternative Energy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Firsthand Alternative is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Vanguard Energy Index

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vanguard Energy Index has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Vanguard Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Firsthand Alternative and Vanguard Energy

The main advantage of trading using opposite Firsthand Alternative and Vanguard Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Firsthand Alternative position performs unexpectedly, Vanguard Energy 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 Vanguard Energy will offset losses from the drop in Vanguard Energy's long position.

The idea behind Firsthand Alternative Energy and Vanguard Energy Index pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.