Correlation Between FirstEnergy and Gabelli Utilities

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

By analyzing existing cross correlation between FirstEnergy and Gabelli Utilities, you can compare the effects of market volatilities on FirstEnergy and Gabelli Utilities 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 Gabelli Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstEnergy and Gabelli Utilities.

Diversification Opportunities for FirstEnergy and Gabelli Utilities

0.81

Correlation Coefficient

FirstEnergy  Gabelli Utilities

Very poor diversification

The 3 months correlation between FirstEnergy and Gabelli is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Gabelli Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gabelli Utilities 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 Gabelli Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gabelli Utilities has no effect on the direction of FirstEnergy i.e., FirstEnergy and Gabelli Utilities go up and down completely randomly.

Pair Corralation between FirstEnergy and Gabelli Utilities

Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 1.24 times more return on investment than Gabelli Utilities. However, FirstEnergy is 1.24 times more volatile than Gabelli Utilities. It trades about 0.01 of its potential returns per unit of risk. Gabelli Utilities is currently generating about 0.0 per unit of risk. If you would invest  3,863  in FirstEnergy on September 23, 2024 and sell it today you would earn a total of  116.00  from holding FirstEnergy or generate 3.0% return on investment over 90 days.

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

FirstEnergy  vs.  Gabelli Utilities

FirstEnergy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FirstEnergy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Gabelli Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with FirstEnergy and Gabelli Utilities

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

The idea behind FirstEnergy and Gabelli Utilities 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.

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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..