Correlation Between WEC Energy and Duke Energy
Can any of the company-specific risk be diversified away by investing in both WEC Energy and Duke 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 WEC Energy and Duke Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WEC Energy Group and Duke Energy, you can compare the effects of market volatilities on WEC Energy and Duke 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 WEC Energy with a short position of Duke Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEC Energy and Duke Energy.
Diversification Opportunities for WEC Energy and Duke Energy
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WEC and Duke is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy and WEC 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 WEC Energy Group are associated (or correlated) with Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of WEC Energy i.e., WEC Energy and Duke Energy go up and down completely randomly.
Pair Corralation between WEC Energy and Duke Energy
Assuming the 90 days horizon WEC Energy is expected to generate 1.39 times less return on investment than Duke Energy. In addition to that, WEC Energy is 1.61 times more volatile than Duke Energy. It trades about 0.05 of its total potential returns per unit of risk. Duke Energy is currently generating about 0.11 per unit of volatility. If you would invest 10,378 in Duke Energy on November 2, 2024 and sell it today you would earn a total of 268.00 from holding Duke Energy or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
WEC Energy Group vs. Duke Energy
Performance |
| Timeline |
| WEC Energy Group |
| Duke Energy |
WEC Energy and Duke Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WEC Energy and Duke Energy
The main advantage of trading using opposite WEC Energy and Duke Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC Energy position performs unexpectedly, Duke 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 Duke Energy will offset losses from the drop in Duke Energy's long position.| WEC Energy vs. Duke Energy | WEC Energy vs. ENDESA ADR 12 | WEC Energy vs. CK Infrastructure Holdings | WEC Energy vs. Enel Chile SA |
| Duke Energy vs. WEC Energy Group | Duke Energy vs. ENDESA ADR 12 | Duke Energy vs. CK Infrastructure Holdings | Duke Energy vs. Enel Chile SA |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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