Correlation Between FirstEnergy and Portland General

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

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

Diversification Opportunities for FirstEnergy and Portland General

0.21

Correlation Coefficient

FirstEnergy  Portland General

Modest diversification

The 3 months correlation between FirstEnergy and Portland is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Portland General Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portland General Electric 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 Portland General. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portland General Electric has no effect on the direction of FirstEnergy i.e., FirstEnergy and Portland General go up and down completely randomly.

Pair Corralation between FirstEnergy and Portland General

Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 1.11 times less return on investment than Portland General. In addition to that, FirstEnergy is 1.45 times more volatile than Portland General Electric. It trades about 0.03 of its total potential returns per unit of risk. Portland General Electric is currently generating about 0.04 per unit of volatility. If you would invest  4,304  in Portland General Electric on December 30, 2024 and sell it today you would earn a total of  137.00  from holding Portland General Electric or generate 3.18% return on investment over 90 days.

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

FirstEnergy  vs.  Portland General Electric

FirstEnergy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FirstEnergy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, FirstEnergy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Portland General Electric

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Portland General Electric are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Portland General is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with FirstEnergy and Portland General

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

The idea behind FirstEnergy and Portland General Electric 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.