Correlation Between First National and Clearway Energy

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

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

Diversification Opportunities for First National and Clearway Energy

0.49

Correlation Coefficient

First National  Clearway Energy

Very weak diversification

The 3 months correlation between First and Clearway is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding First National Energy and Clearway Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearway Energy and First National 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 First National Energy are associated (or correlated) with Clearway Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearway Energy has no effect on the direction of First National i.e., First National and Clearway Energy go up and down completely randomly.

Pair Corralation between First National and Clearway Energy

Given the investment horizon of 90 days First National is expected to generate 2.72 times less return on investment than Clearway Energy. In addition to that, First National is 7.75 times more volatile than Clearway Energy. It trades about 0.0 of its total potential returns per unit of risk. Clearway Energy is currently generating about 0.06 per unit of volatility. If you would invest  2,604  in Clearway Energy on September 3, 2024 and sell it today you would earn a total of  177.00  from holding Clearway Energy or generate 6.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

First National Energy  vs.  Clearway Energy

First National Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First National Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, First National is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Clearway Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clearway Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Clearway Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First National and Clearway Energy

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

The idea behind First National Energy and Clearway 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.