Correlation Between DTE Energy and IDACORP
Can any of the company-specific risk be diversified away by investing in both DTE Energy and IDACORP 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 DTE Energy and IDACORP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DTE Energy and IDACORP, you can compare the effects of market volatilities on DTE Energy and IDACORP 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 DTE Energy with a short position of IDACORP. Check out your portfolio center. Please also check ongoing floating volatility patterns of DTE Energy and IDACORP.
Diversification Opportunities for DTE Energy and IDACORP
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between DTE and IDACORP is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy and IDACORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDACORP and DTE Energy 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 DTE Energy are associated (or correlated) with IDACORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDACORP has no effect on the direction of DTE Energy i.e., DTE Energy and IDACORP go up and down completely randomly.
Pair Corralation between DTE Energy and IDACORP
Considering the 90-day investment horizon DTE Energy is expected to generate 1.03 times more return on investment than IDACORP. However, DTE Energy is 1.03 times more volatile than IDACORP. It trades about 0.03 of its potential returns per unit of risk. IDACORP is currently generating about 0.02 per unit of risk. If you would invest 10,623 in DTE Energy on November 2, 2024 and sell it today you would earn a total of 1,348 from holding DTE Energy or generate 12.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
DTE Energy vs. IDACORP
Performance |
| Timeline |
| DTE Energy |
| IDACORP |
DTE Energy and IDACORP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DTE Energy and IDACORP
The main advantage of trading using opposite DTE Energy and IDACORP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTE Energy position performs unexpectedly, IDACORP 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 IDACORP will offset losses from the drop in IDACORP's long position.| DTE Energy vs. Alliant Energy Corp | DTE Energy vs. Ameren Corp | DTE Energy vs. CenterPoint Energy | DTE Energy vs. Pinnacle West Capital |
| IDACORP vs. CMS Energy | IDACORP vs. Pinnacle West Capital | IDACORP vs. Alliant Energy Corp | IDACORP vs. Portland General Electric |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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