Correlation Between FirstEnergy and Artesian Resources

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

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

Diversification Opportunities for FirstEnergy and Artesian Resources

-0.59

Correlation Coefficient

FirstEnergy  Artesian Resources

Excellent diversification

The 3 months correlation between FirstEnergy and Artesian is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding FirstEnergy and Artesian Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Artesian Resources 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 Artesian Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Artesian Resources has no effect on the direction of FirstEnergy i.e., FirstEnergy and Artesian Resources go up and down completely randomly.

Pair Corralation between FirstEnergy and Artesian Resources

Allowing for the 90-day total investment horizon FirstEnergy is expected to generate 0.9 times more return on investment than Artesian Resources. However, FirstEnergy is 1.12 times less risky than Artesian Resources. It trades about -0.04 of its potential returns per unit of risk. Artesian Resources is currently generating about -0.26 per unit of risk. If you would invest  4,434  in FirstEnergy on July 18, 2024 and sell it today you would lose (44.00) from holding FirstEnergy or give up 0.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

FirstEnergy  vs.  Artesian Resources

FirstEnergy

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in FirstEnergy are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, FirstEnergy may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Artesian Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Artesian Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with FirstEnergy and Artesian Resources

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

The idea behind FirstEnergy and Artesian Resources 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.