Correlation Between Sitka Gold and DTE Energy

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

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

Diversification Opportunities for Sitka Gold and DTE Energy

0.03

Correlation Coefficient

Sitka Gold  DTE Energy

Significant diversification

The 3 months correlation between Sitka and DTE is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sitka Gold Corp and DTE Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Sitka Gold 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 Sitka Gold Corp 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 Sitka Gold i.e., Sitka Gold and DTE Energy go up and down completely randomly.

Pair Corralation between Sitka Gold and DTE Energy

Assuming the 90 days horizon Sitka Gold Corp is expected to generate 10.64 times more return on investment than DTE Energy. However, Sitka Gold is 10.64 times more volatile than DTE Energy Co. It trades about 0.1 of its potential returns per unit of risk. DTE Energy Co is currently generating about -0.21 per unit of risk. If you would invest  19.00  in Sitka Gold Corp on September 18, 2024 and sell it today you would earn a total of  6.00  from holding Sitka Gold Corp or generate 31.58% return on investment over 90 days.

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

Sitka Gold Corp  vs.  DTE Energy Co

Sitka Gold Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sitka Gold Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, Sitka Gold reported solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Sitka Gold and DTE Energy

The main advantage of trading using opposite Sitka Gold and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sitka Gold 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.

The idea behind Sitka Gold Corp and DTE Energy Co 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.