Correlation Between Central Puerto and DTE Energy

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

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

Diversification Opportunities for Central Puerto and DTE Energy

-0.38

Correlation Coefficient

Central Puerto  DTE Energy

Very good diversification

The 3 months correlation between Central and DTE is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Central Puerto SA and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Central Puerto 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 Central Puerto SA 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 Central Puerto i.e., Central Puerto and DTE Energy go up and down completely randomly.

Pair Corralation between Central Puerto and DTE Energy

Given the investment horizon of 90 days Central Puerto SA is expected to generate 2.09 times more return on investment than DTE Energy. However, Central Puerto is 2.09 times more volatile than DTE Energy. It trades about 0.32 of its potential returns per unit of risk. DTE Energy is currently generating about 0.02 per unit of risk. If you would invest  891.00  in Central Puerto SA on August 31, 2024 and sell it today you would earn a total of  486.00  from holding Central Puerto SA or generate 54.55% return on investment over 90 days.

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

Central Puerto SA  vs.  DTE Energy

Central Puerto SA

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Central Puerto SA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Central Puerto unveiled solid returns over the last few months and may actually be approaching a breakup point.

DTE Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DTE Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, DTE Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Central Puerto and DTE Energy

The main advantage of trading using opposite Central Puerto and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Puerto 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 Central Puerto SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.