Correlation Between NEP Old and First National

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

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

Diversification Opportunities for NEP Old and First National

0.25

Correlation Coefficient

NEP Old  First National

Modest diversification

The 3 months correlation between NEP and First is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding NEP Old and First National Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Energy and NEP Old 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 NEP Old are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Energy has no effect on the direction of NEP Old i.e., NEP Old and First National go up and down completely randomly.

Pair Corralation between NEP Old and First National

Considering the 90-day investment horizon NEP Old is expected to under-perform the First National. But the stock apears to be less risky and, when comparing its historical volatility, NEP Old is 2.76 times less risky than First National. The stock trades about -0.33 of its potential returns per unit of risk. The First National Energy is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  9.06  in First National Energy on December 28, 2024 and sell it today you would lose (6.39) from holding First National Energy or give up 70.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	36.51%
Values	Daily Returns

NEP Old  vs.  First National Energy

NEP Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days NEP Old has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

First National Energy

Risk-Adjusted Performance

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 latest fragile 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.

Pair Trading with NEP Old and First National

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

The idea behind NEP Old and First National 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.

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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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.