Correlation Between FirstEnergy and Spirit Of

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

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

Diversification Opportunities for FirstEnergy and Spirit Of

0.62

Correlation Coefficient

FirstEnergy  Spirit Of

Poor diversification

The 3 months correlation between FirstEnergy and Spirit is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Spirit Of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spirit Of America 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 Spirit Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spirit Of America has no effect on the direction of FirstEnergy i.e., FirstEnergy and Spirit Of go up and down completely randomly.

Pair Corralation between FirstEnergy and Spirit Of

Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 2.16 times less return on investment than Spirit Of. But when comparing it to its historical volatility, FirstEnergy is 1.05 times less risky than Spirit Of. It trades about 0.06 of its potential returns per unit of risk. Spirit Of America is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,819  in Spirit Of America on September 30, 2024 and sell it today you would earn a total of  247.00  from holding Spirit Of America or generate 13.58% return on investment over 90 days.

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

FirstEnergy  vs.  Spirit Of America

FirstEnergy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FirstEnergy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Spirit Of America

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spirit Of America has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Spirit Of is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with FirstEnergy and Spirit Of

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

The idea behind FirstEnergy and Spirit Of America 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 Global Correlations module to find global opportunities by holding instruments from different markets.