Correlation Between MGE Energy and FirstEnergy
Can any of the company-specific risk be diversified away by investing in both MGE Energy and FirstEnergy 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 MGE Energy and FirstEnergy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGE Energy and FirstEnergy, you can compare the effects of market volatilities on MGE Energy and FirstEnergy 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 MGE Energy with a short position of FirstEnergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGE Energy and FirstEnergy.
Diversification Opportunities for MGE Energy and FirstEnergy
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MGE and FirstEnergy is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding MGE Energy and FirstEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstEnergy and MGE Energy 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 MGE Energy are associated (or correlated) with FirstEnergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstEnergy has no effect on the direction of MGE Energy i.e., MGE Energy and FirstEnergy go up and down completely randomly.
Pair Corralation between MGE Energy and FirstEnergy
Given the investment horizon of 90 days MGE Energy is expected to under-perform the FirstEnergy. In addition to that, MGE Energy is 1.38 times more volatile than FirstEnergy. It trades about -0.02 of its total potential returns per unit of risk. FirstEnergy is currently generating about 0.0 per unit of volatility. If you would invest 3,837 in FirstEnergy on February 1, 2024 and sell it today you would lose (3.00) from holding FirstEnergy or give up 0.08% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
MGE Energy vs. FirstEnergy
Performance |
Timeline |
MGE Energy |
FirstEnergy |
MGE Energy and FirstEnergy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MGE Energy and FirstEnergy
The main advantage of trading using opposite MGE Energy and FirstEnergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGE Energy position performs unexpectedly, FirstEnergy 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 FirstEnergy will offset losses from the drop in FirstEnergy's long position.MGE Energy vs. Centrais Electricas Brasileiras | MGE Energy vs. Entergy Texas | MGE Energy vs. Centrais Eltricas Brasileiras | MGE Energy vs. Central Puerto SA |
FirstEnergy vs. Centrais Electricas Brasileiras | FirstEnergy vs. Entergy Texas | FirstEnergy vs. Centrais Eltricas Brasileiras | FirstEnergy vs. Central Puerto SA |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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