Correlation Between Algonquin Power and DTE Energy
Can any of the company-specific risk be diversified away by investing in both Algonquin Power and DTE Energy 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 Algonquin Power and DTE Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Algonquin Power Utilities and DTE Energy Co, you can compare the effects of market volatilities on Algonquin Power and DTE Energy 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 Algonquin Power with a short position of DTE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and DTE Energy.
Diversification Opportunities for Algonquin Power and DTE Energy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Algonquin and DTE is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and DTE Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Algonquin Power 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 Algonquin Power Utilities are associated (or correlated) with DTE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTE Energy has no effect on the direction of Algonquin Power i.e., Algonquin Power and DTE Energy go up and down completely randomly.
Pair Corralation between Algonquin Power and DTE Energy
Considering the 90-day investment horizon Algonquin Power Utilities is expected to under-perform the DTE Energy. In addition to that, Algonquin Power is 1.85 times more volatile than DTE Energy Co. It trades about -0.15 of its total potential returns per unit of risk. DTE Energy Co is currently generating about -0.17 per unit of volatility. If you would invest 2,379 in DTE Energy Co on August 24, 2024 and sell it today you would lose (76.00) from holding DTE Energy Co or give up 3.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Algonquin Power Utilities vs. DTE Energy Co
Performance |
| Timeline |
| Algonquin Power Utilities |
| DTE Energy |
Algonquin Power and DTE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Algonquin Power and DTE Energy
The main advantage of trading using opposite Algonquin Power and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, DTE Energy 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 DTE Energy will offset losses from the drop in DTE Energy's long position.| Algonquin Power vs. Brookfield Renewable Corp | Algonquin Power vs. Nextera Energy Partners | Algonquin Power vs. Clearway Energy Class | Algonquin Power vs. Atlantica Sustainable Infrastructure |
| DTE Energy vs. Southern Co | DTE Energy vs. Duke Energy Corp | DTE Energy vs. Georgia Power Co | DTE Energy vs. Entergy Arkansas LLC |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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