Correlation Between DTE Energy and SSE PLC
Can any of the company-specific risk be diversified away by investing in both DTE Energy and SSE PLC 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 SSE PLC 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 SSE PLC ADR, you can compare the effects of market volatilities on DTE Energy and SSE PLC 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 SSE PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of DTE Energy and SSE PLC.
Diversification Opportunities for DTE Energy and SSE PLC
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DTE and SSE is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy Co and SSE PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSE PLC ADR 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 SSE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSE PLC ADR has no effect on the direction of DTE Energy i.e., DTE Energy and SSE PLC go up and down completely randomly.
Pair Corralation between DTE Energy and SSE PLC
Considering the 90-day investment horizon DTE Energy Co is expected to under-perform the SSE PLC. But the stock apears to be less risky and, when comparing its historical volatility, DTE Energy Co is 1.55 times less risky than SSE PLC. The stock trades about -0.1 of its potential returns per unit of risk. The SSE PLC ADR is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest 2,280 in SSE PLC ADR on September 4, 2024 and sell it today you would lose (35.00) from holding SSE PLC ADR or give up 1.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DTE Energy Co vs. SSE PLC ADR
Performance |
| Timeline |
| DTE Energy |
| SSE PLC ADR |
DTE Energy and SSE PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DTE Energy and SSE PLC
The main advantage of trading using opposite DTE Energy and SSE PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTE Energy position performs unexpectedly, SSE PLC 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 SSE PLC will offset losses from the drop in SSE PLC'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 |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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