Correlation Between Xcel Energy and DTE Energy
Can any of the company-specific risk be diversified away by investing in both Xcel 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 Xcel 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 Xcel Energy and DTE Energy, you can compare the effects of market volatilities on Xcel 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 Xcel Energy with a short position of DTE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xcel Energy and DTE Energy.
Diversification Opportunities for Xcel Energy and DTE Energy
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xcel and DTE is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Xcel 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 Xcel 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 Xcel Energy i.e., Xcel Energy and DTE Energy go up and down completely randomly.
Pair Corralation between Xcel Energy and DTE Energy
Considering the 90-day investment horizon Xcel Energy is expected to generate 1.76 times less return on investment than DTE Energy. In addition to that, Xcel Energy is 1.1 times more volatile than DTE Energy. It trades about 0.16 of its total potential returns per unit of risk. DTE Energy is currently generating about 0.3 per unit of volatility. If you would invest 12,371 in DTE Energy on December 10, 2024 and sell it today you would earn a total of 830.00 from holding DTE Energy or generate 6.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xcel Energy vs. DTE Energy
Performance |
| Timeline |
| Xcel Energy |
| DTE Energy |
Xcel Energy and DTE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xcel Energy and DTE Energy
The main advantage of trading using opposite Xcel Energy and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xcel 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.| Xcel Energy vs. Alliant Energy Corp | ||
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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