Correlation Between FirstEnergy and Vast Renewables

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

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

Diversification Opportunities for FirstEnergy and Vast Renewables

-0.17

Correlation Coefficient

FirstEnergy  Vast Renewables

Good diversification

The 3 months correlation between FirstEnergy and Vast is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Vast Renewables Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vast Renewables 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 Vast Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vast Renewables has no effect on the direction of FirstEnergy i.e., FirstEnergy and Vast Renewables go up and down completely randomly.

Pair Corralation between FirstEnergy and Vast Renewables

Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 0.28 times more return on investment than Vast Renewables. However, FirstEnergy is 3.55 times less risky than Vast Renewables. It trades about 0.01 of its potential returns per unit of risk. Vast Renewables Limited is currently generating about -0.26 per unit of risk. If you would invest  3,922  in FirstEnergy on December 28, 2024 and sell it today you would earn a total of  23.00  from holding FirstEnergy or generate 0.59% return on investment over 90 days.

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

FirstEnergy  vs.  Vast Renewables Limited

FirstEnergy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FirstEnergy are ranked lower than 1 (%) 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.

Vast Renewables

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vast Renewables Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with FirstEnergy and Vast Renewables

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

The idea behind FirstEnergy and Vast Renewables Limited 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.