Correlation Between DTE Energy and Service International

Can any of the company-specific risk be diversified away by investing in both DTE Energy and Service International 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 DTE Energy and Service International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between DTE Energy and Service International, you can compare the effects of market volatilities on DTE Energy and Service International 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 DTE Energy with a short position of Service International. Check out your portfolio center. Please also check ongoing floating volatility patterns of DTE Energy and Service International.

Diversification Opportunities for DTE Energy and Service International

-0.79

Correlation Coefficient

DTE Energy  Service International

Pay attention - limited upside

The 3 months correlation between DTE and Service is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy and Service International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service International and DTE 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 DTE Energy are associated (or correlated) with Service International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service International has no effect on the direction of DTE Energy i.e., DTE Energy and Service International go up and down completely randomly.

Pair Corralation between DTE Energy and Service International

Considering the 90-day investment horizon DTE Energy is expected to under-perform the Service International. But the stock apears to be less risky and, when comparing its historical volatility, DTE Energy is 1.36 times less risky than Service International. The stock trades about -0.06 of its potential returns per unit of risk. The Service International is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7,777  in Service International on September 3, 2024 and sell it today you would earn a total of  1,082  from holding Service International or generate 13.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

DTE Energy  vs.  Service International

DTE Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DTE Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, DTE Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Service International

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Service International are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental indicators, Service International demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DTE Energy and Service International

The main advantage of trading using opposite DTE Energy and Service International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTE Energy position performs unexpectedly, Service International 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 Service International will offset losses from the drop in Service International's long position.

The idea behind DTE Energy and Service International pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.