Correlation Between DTE Energy and CMS Energy
Can any of the company-specific risk be diversified away by investing in both DTE Energy and CMS 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 DTE Energy and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DTE Energy and CMS Energy, you can compare the effects of market volatilities on DTE Energy and CMS 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 DTE Energy with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of DTE Energy and CMS Energy.
Diversification Opportunities for DTE Energy and CMS Energy
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between DTE and CMS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy 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 CMS Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMS Energy has no effect on the direction of DTE Energy i.e., DTE Energy and CMS Energy go up and down completely randomly.
Pair Corralation between DTE Energy and CMS Energy
Considering the 90-day investment horizon DTE Energy is expected to generate 0.89 times more return on investment than CMS Energy. However, DTE Energy is 1.12 times less risky than CMS Energy. It trades about 0.02 of its potential returns per unit of risk. CMS Energy is currently generating about 0.01 per unit of risk. If you would invest 1,812 in DTE Energy on August 24, 2024 and sell it today you would earn a total of 121.00 from holding DTE Energy or generate 6.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
DTE Energy vs. CMS Energy
Performance |
| Timeline |
| DTE Energy |
| CMS Energy |
DTE Energy and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DTE Energy and CMS Energy
The main advantage of trading using opposite DTE Energy and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTE Energy position performs unexpectedly, CMS 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 CMS Energy will offset losses from the drop in CMS Energy's long position.| DTE Energy vs. Kanzhun Ltd ADR | DTE Energy vs. Sonic Automotive | DTE Energy vs. Avis Budget Group | DTE Energy vs. DTE Energy |
| CMS Energy vs. Entergy Texas | CMS Energy vs. Duke Energy | CMS Energy vs. Spire Inc | CMS Energy vs. Consumers 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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