Correlation Between FirstEnergy and TXNM Energy,

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

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

Diversification Opportunities for FirstEnergy and TXNM Energy,

0.83

Correlation Coefficient

FirstEnergy  TXNM Energy,

Very poor diversification

The 3 months correlation between FirstEnergy and TXNM is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and TXNM Energy, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TXNM Energy, 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 TXNM Energy,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TXNM Energy, has no effect on the direction of FirstEnergy i.e., FirstEnergy and TXNM Energy, go up and down completely randomly.

Pair Corralation between FirstEnergy and TXNM Energy,

Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 2.47 times less return on investment than TXNM Energy,. But when comparing it to its historical volatility, FirstEnergy is 1.04 times less risky than TXNM Energy,. It trades about 0.04 of its potential returns per unit of risk. TXNM Energy, is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,864  in TXNM Energy, on November 28, 2024 and sell it today you would earn a total of  305.00  from holding TXNM Energy, or generate 6.27% return on investment over 90 days.

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

FirstEnergy  vs.  TXNM Energy,

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.

TXNM Energy,

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TXNM Energy, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, TXNM Energy, may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with FirstEnergy and TXNM Energy,

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

The idea behind FirstEnergy and TXNM Energy, 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.