Correlation Between DTE Energy and Strats SM

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

By analyzing existing cross correlation between DTE Energy Co and Strats SM Trust, you can compare the effects of market volatilities on DTE Energy and Strats SM 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 Strats SM. Check out your portfolio center. Please also check ongoing floating volatility patterns of DTE Energy and Strats SM.

Diversification Opportunities for DTE Energy and Strats SM

-0.2

Correlation Coefficient

DTE Energy  Strats SM

Good diversification

The 3 months correlation between DTE and Strats is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy Co and Strats SM Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Strats SM Trust 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 Co are associated (or correlated) with Strats SM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Strats SM Trust has no effect on the direction of DTE Energy i.e., DTE Energy and Strats SM go up and down completely randomly.

Pair Corralation between DTE Energy and Strats SM

Considering the 90-day investment horizon DTE Energy Co is expected to under-perform the Strats SM. But the stock apears to be less risky and, when comparing its historical volatility, DTE Energy Co is 1.02 times less risky than Strats SM. The stock trades about -0.2 of its potential returns per unit of risk. The Strats SM Trust is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,455  in Strats SM Trust on September 17, 2024 and sell it today you would earn a total of  32.00  from holding Strats SM Trust or generate 1.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

DTE Energy Co  vs.  Strats SM Trust

DTE Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DTE Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Strats SM Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strats SM Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking indicators, Strats SM is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with DTE Energy and Strats SM

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

The idea behind DTE Energy Co and Strats SM Trust 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.