Correlation Between DTE Energy and Allete
Can any of the company-specific risk be diversified away by investing in both DTE Energy and Allete 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 Allete into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DTE Energy Co and Allete Inc, you can compare the effects of market volatilities on DTE Energy and Allete 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 Allete. Check out your portfolio center. Please also check ongoing floating volatility patterns of DTE Energy and Allete.
Diversification Opportunities for DTE Energy and Allete
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between DTE and Allete is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy Co and Allete Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allete Inc 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 Co are associated (or correlated) with Allete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allete Inc has no effect on the direction of DTE Energy i.e., DTE Energy and Allete go up and down completely randomly.
Pair Corralation between DTE Energy and Allete
Considering the 90-day investment horizon DTE Energy Co is expected to under-perform the Allete. In addition to that, DTE Energy is 2.82 times more volatile than Allete Inc. It trades about -0.02 of its total potential returns per unit of risk. Allete Inc is currently generating about 0.15 per unit of volatility. If you would invest 6,267 in Allete Inc on November 2, 2024 and sell it today you would earn a total of 301.00 from holding Allete Inc or generate 4.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
DTE Energy Co vs. Allete Inc
Performance |
| Timeline |
| DTE Energy |
| Allete Inc |
DTE Energy and Allete Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DTE Energy and Allete
The main advantage of trading using opposite DTE Energy and Allete positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTE Energy position performs unexpectedly, Allete 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 Allete will offset losses from the drop in Allete's long position.| DTE Energy vs. Southern Co | DTE Energy vs. Duke Energy Corp | DTE Energy vs. Georgia Power Co | DTE Energy vs. Entergy Arkansas LLC |
| Allete vs. Avista | Allete vs. Black Hills | Allete vs. Montauk Renewables | Allete vs. Companhia Paranaense de |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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