Correlation Between PPL and FirstEnergy
Can any of the company-specific risk be diversified away by investing in both PPL 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 PPL and FirstEnergy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PPL Corporation and FirstEnergy, you can compare the effects of market volatilities on PPL 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 PPL with a short position of FirstEnergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PPL and FirstEnergy.
Diversification Opportunities for PPL and FirstEnergy
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between PPL and FirstEnergy is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding PPL Corp. and FirstEnergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstEnergy and PPL 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 PPL Corporation 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 PPL i.e., PPL and FirstEnergy go up and down completely randomly.
Pair Corralation between PPL and FirstEnergy
Considering the 90-day investment horizon PPL is expected to generate 1.02 times less return on investment than FirstEnergy. In addition to that, PPL is 1.17 times more volatile than FirstEnergy. It trades about 0.13 of its total potential returns per unit of risk. FirstEnergy is currently generating about 0.15 per unit of volatility. If you would invest 4,045 in FirstEnergy on June 4, 2025 and sell it today you would earn a total of 317.00 from holding FirstEnergy or generate 7.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
PPL Corp. vs. FirstEnergy
Performance |
| Timeline |
| PPL Corporation |
| FirstEnergy |
PPL and FirstEnergy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PPL and FirstEnergy
The main advantage of trading using opposite PPL and FirstEnergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PPL 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.| PPL vs. Centrais Eltricas Brasileiras | PPL vs. Korea Electric Power | PPL vs. Central Puerto SA | PPL vs. CMS Energy |
| FirstEnergy vs. CenterPoint Energy | FirstEnergy vs. Pinnacle West Capital | FirstEnergy vs. Edison International | FirstEnergy vs. Public Service Enterprise |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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