Correlation Between Duke Energy and STRATS SM
Can any of the company-specific risk be diversified away by investing in both Duke Energy and STRATS SM 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 STRATS SM 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 STRATS SM Trust, you can compare the effects of market volatilities on Duke Energy and STRATS SM 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 STRATS SM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duke Energy and STRATS SM.
Diversification Opportunities for Duke Energy and STRATS SM
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Duke and STRATS is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy Corp and STRATS SM Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATS SM Trust 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 STRATS SM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATS SM Trust has no effect on the direction of Duke Energy i.e., Duke Energy and STRATS SM go up and down completely randomly.
Pair Corralation between Duke Energy and STRATS SM
Given the investment horizon of 90 days Duke Energy is expected to generate 1.55 times less return on investment than STRATS SM. But when comparing it to its historical volatility, Duke Energy Corp is 2.94 times less risky than STRATS SM. It trades about 0.04 of its potential returns per unit of risk. STRATS SM Trust is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,221 in STRATS SM Trust on September 2, 2024 and sell it today you would earn a total of 60.00 from holding STRATS SM Trust or generate 2.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 96.83% |
| Values | Daily Returns |
Duke Energy Corp vs. STRATS SM Trust
Performance |
| Timeline |
| Duke Energy Corp |
| STRATS SM Trust |
Duke Energy and STRATS SM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Duke Energy and STRATS SM
The main advantage of trading using opposite Duke Energy and STRATS SM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Duke Energy position performs unexpectedly, STRATS SM 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 STRATS SM will offset losses from the drop in STRATS SM'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 |
| STRATS SM vs. CMS Energy Corp | STRATS SM vs. Southern Co | STRATS SM vs. Duke Energy Corp | STRATS SM vs. Southern Co |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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