Correlation Between DTE Energy and Northland Power
Can any of the company-specific risk be diversified away by investing in both DTE Energy and Northland Power 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 Northland Power 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 Northland Power, you can compare the effects of market volatilities on DTE Energy and Northland Power 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 Northland Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of DTE Energy and Northland Power.
Diversification Opportunities for DTE Energy and Northland Power
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between DTE and Northland is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy Co and Northland Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northland Power 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 Northland Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northland Power has no effect on the direction of DTE Energy i.e., DTE Energy and Northland Power go up and down completely randomly.
Pair Corralation between DTE Energy and Northland Power
Considering the 90-day investment horizon DTE Energy Co is expected to generate 0.34 times more return on investment than Northland Power. However, DTE Energy Co is 2.96 times less risky than Northland Power. It trades about -0.05 of its potential returns per unit of risk. Northland Power is currently generating about -0.09 per unit of risk. If you would invest 2,320 in DTE Energy Co on September 1, 2024 and sell it today you would lose (22.00) from holding DTE Energy Co or give up 0.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
DTE Energy Co vs. Northland Power
Performance |
| Timeline |
| DTE Energy |
| Northland Power |
DTE Energy and Northland Power Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DTE Energy and Northland Power
The main advantage of trading using opposite DTE Energy and Northland Power positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTE Energy position performs unexpectedly, Northland Power 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 Northland Power will offset losses from the drop in Northland Power'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 |
| Northland Power vs. Nextera Energy | Northland Power vs. Consumers Energy | Northland Power vs. Duke Energy | Northland Power vs. Centrais Electricas Brasileiras |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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