Correlation Between Eversource Energy and DTE Energy
Can any of the company-specific risk be diversified away by investing in both Eversource 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 Eversource 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 Eversource Energy and DTE Energy, you can compare the effects of market volatilities on Eversource 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 Eversource Energy with a short position of DTE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eversource Energy and DTE Energy.
Diversification Opportunities for Eversource Energy and DTE Energy
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eversource and DTE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Eversource Energy and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Eversource 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 Eversource Energy 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 Eversource Energy i.e., Eversource Energy and DTE Energy go up and down completely randomly.
Pair Corralation between Eversource Energy and DTE Energy
Allowing for the 90-day total investment horizon Eversource Energy is expected to under-perform the DTE Energy. But the stock apears to be less risky and, when comparing its historical volatility, Eversource Energy is 1.0 times less risky than DTE Energy. The stock trades about -0.21 of its potential returns per unit of risk. The DTE Energy is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest 12,999 in DTE Energy on August 24, 2024 and sell it today you would lose (601.00) from holding DTE Energy or give up 4.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Eversource Energy vs. DTE Energy
Performance |
| Timeline |
| Eversource Energy |
| DTE Energy |
Eversource Energy and DTE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eversource Energy and DTE Energy
The main advantage of trading using opposite Eversource Energy and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eversource 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.| Eversource Energy vs. CenterPoint Energy | Eversource Energy vs. FirstEnergy | Eversource Energy vs. Pinnacle West Capital | Eversource Energy vs. Edison International |
| 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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