Correlation Between Crown LNG and DTE Energy
Can any of the company-specific risk be diversified away by investing in both Crown LNG 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 Crown LNG and DTE Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Crown LNG Holdings and DTE Energy, you can compare the effects of market volatilities on Crown LNG 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 Crown LNG with a short position of DTE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Crown LNG and DTE Energy.
Diversification Opportunities for Crown LNG and DTE Energy
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Crown and DTE is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Crown LNG Holdings and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Crown LNG 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 Crown LNG Holdings 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 Crown LNG i.e., Crown LNG and DTE Energy go up and down completely randomly.
Pair Corralation between Crown LNG and DTE Energy
Assuming the 90 days horizon Crown LNG Holdings is expected to generate 32.3 times more return on investment than DTE Energy. However, Crown LNG is 32.3 times more volatile than DTE Energy. It trades about 0.15 of its potential returns per unit of risk. DTE Energy is currently generating about -0.39 per unit of risk. If you would invest 2.40 in Crown LNG Holdings on August 24, 2024 and sell it today you would earn a total of 0.61 from holding Crown LNG Holdings or generate 25.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Crown LNG Holdings vs. DTE Energy
Performance |
| Timeline |
| Crown LNG Holdings |
| DTE Energy |
Crown LNG and DTE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Crown LNG and DTE Energy
The main advantage of trading using opposite Crown LNG and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crown LNG 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.| Crown LNG vs. Eni SpA ADR | Crown LNG vs. BP PLC ADR | Crown LNG vs. Ecopetrol SA ADR | Crown LNG vs. Suncor Energy |
| DTE Energy vs. Kanzhun Ltd ADR | DTE Energy vs. Sonic Automotive | DTE Energy vs. Avis Budget Group | DTE Energy vs. DTE Energy |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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