Correlation Between Duke Energy and DTE Energy
Can any of the company-specific risk be diversified away by investing in both Duke Energy and DTE 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 Duke Energy and DTE Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Duke Energy Corp and DTE Energy, you can compare the effects of market volatilities on Duke Energy and DTE 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 Duke Energy with a short position of DTE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duke Energy and DTE Energy.
Diversification Opportunities for Duke Energy and DTE Energy
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Duke and DTE is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy Corp and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Duke 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 Duke Energy Corp are associated (or correlated) with DTE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTE Energy has no effect on the direction of Duke Energy i.e., Duke Energy and DTE Energy go up and down completely randomly.
Pair Corralation between Duke Energy and DTE Energy
Given the investment horizon of 90 days Duke Energy Corp is expected to generate 0.52 times more return on investment than DTE Energy. However, Duke Energy Corp is 1.91 times less risky than DTE Energy. It trades about -0.05 of its potential returns per unit of risk. DTE Energy is currently generating about -0.23 per unit of risk. If you would invest 2,517 in Duke Energy Corp on August 27, 2024 and sell it today you would lose (24.00) from holding Duke Energy Corp or give up 0.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Duke Energy Corp vs. DTE Energy
Performance |
| Timeline |
| Duke Energy Corp |
| DTE Energy |
Duke Energy and DTE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Duke Energy and DTE Energy
The main advantage of trading using opposite Duke Energy and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duke Energy position performs unexpectedly, DTE 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 DTE Energy will offset losses from the drop in DTE Energy's long position.| Duke Energy vs. Southern Co | Duke Energy vs. DTE Energy Co | Duke Energy vs. CMS Energy Corp | Duke Energy vs. CMS Energy Corp |
| DTE Energy vs. Consumers Energy | DTE Energy vs. CMS Energy | DTE Energy vs. Cadiz Depositary Shares | DTE Energy vs. DTE 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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