Correlation Between United States and DTE Energy

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

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

Diversification Opportunities for United States and DTE Energy

-0.2

Correlation Coefficient

United States  DTE Energy

Good diversification

The 3 months correlation between United and DTE is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding United States Cellular and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and United States 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 United States Cellular 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 United States i.e., United States and DTE Energy go up and down completely randomly.

Pair Corralation between United States and DTE Energy

Considering the 90-day investment horizon United States Cellular is expected to generate 0.67 times more return on investment than DTE Energy. However, United States Cellular is 1.49 times less risky than DTE Energy. It trades about 0.27 of its potential returns per unit of risk. DTE Energy is currently generating about -0.06 per unit of risk. If you would invest  2,104  in United States Cellular on August 31, 2024 and sell it today you would earn a total of  209.00  from holding United States Cellular or generate 9.93% return on investment over 90 days.

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

United States Cellular  vs.  DTE Energy

United States Cellular

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, United States may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 somewhat strong basic indicators, DTE Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with United States and DTE Energy

The main advantage of trading using opposite United States and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Cellular and DTE Energy 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.