Correlation Between Edison International and DTE Energy
Can any of the company-specific risk be diversified away by investing in both Edison International 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 Edison International and DTE Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edison International and DTE Energy, you can compare the effects of market volatilities on Edison International 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 Edison International with a short position of DTE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edison International and DTE Energy.
Diversification Opportunities for Edison International and DTE Energy
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Edison and DTE is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Edison International 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 Edison International 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 Edison International i.e., Edison International and DTE Energy go up and down completely randomly.
Pair Corralation between Edison International and DTE Energy
Considering the 90-day investment horizon Edison International is expected to generate 0.81 times more return on investment than DTE Energy. However, Edison International is 1.24 times less risky than DTE Energy. It trades about 0.16 of its potential returns per unit of risk. DTE Energy is currently generating about -0.03 per unit of risk. If you would invest 8,448 in Edison International on August 28, 2024 and sell it today you would earn a total of 313.00 from holding Edison International or generate 3.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Edison International vs. DTE Energy
Performance |
| Timeline |
| Edison International |
| DTE Energy |
Edison International and DTE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Edison International and DTE Energy
The main advantage of trading using opposite Edison International and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edison International 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.| Edison International vs. Southern Company | Edison International vs. American Electric Power | Edison International vs. Duke Energy | Edison International vs. Dominion Energy |
| DTE Energy vs. Alliant Energy Corp | DTE Energy vs. Ameren Corp | DTE Energy vs. CenterPoint Energy | DTE Energy vs. Pinnacle West Capital |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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