Correlation Between FirstEnergy and Exelon
Can any of the company-specific risk be diversified away by investing in both FirstEnergy and Exelon 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 Exelon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FirstEnergy and Exelon, you can compare the effects of market volatilities on FirstEnergy and Exelon 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 Exelon. Check out your portfolio center. Please also check ongoing floating volatility patterns of FirstEnergy and Exelon.
Diversification Opportunities for FirstEnergy and Exelon
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between FirstEnergy and Exelon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Exelon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exelon 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 Exelon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exelon has no effect on the direction of FirstEnergy i.e., FirstEnergy and Exelon go up and down completely randomly.
Pair Corralation between FirstEnergy and Exelon
Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 0.92 times more return on investment than Exelon. However, FirstEnergy is 1.09 times less risky than Exelon. It trades about 0.05 of its potential returns per unit of risk. Exelon is currently generating about -0.01 per unit of risk. If you would invest 3,860 in FirstEnergy on March 22, 2025 and sell it today you would earn a total of 131.00 from holding FirstEnergy or generate 3.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
FirstEnergy vs. Exelon
Performance |
| Timeline |
| FirstEnergy |
| Exelon |
FirstEnergy and Exelon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FirstEnergy and Exelon
The main advantage of trading using opposite FirstEnergy and Exelon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FirstEnergy position performs unexpectedly, Exelon 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 Exelon will offset losses from the drop in Exelon's long position.| FirstEnergy vs. CenterPoint Energy | FirstEnergy vs. Pinnacle West Capital | FirstEnergy vs. Edison International | FirstEnergy vs. Public Service Enterprise |
| Exelon vs. Duke Energy | Exelon vs. Dominion Energy | Exelon vs. Southern Company | Exelon vs. Consolidated Edison |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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