Correlation Between CenterPoint Energy and Duke Energy

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

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

Diversification Opportunities for CenterPoint Energy and Duke Energy

-0.04

Correlation Coefficient

CenterPoint Energy  Duke Energy

Good diversification

The 3 months correlation between CenterPoint and Duke is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy and CenterPoint 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 CenterPoint Energy are associated (or correlated) with Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of CenterPoint Energy i.e., CenterPoint Energy and Duke Energy go up and down completely randomly.

Pair Corralation between CenterPoint Energy and Duke Energy

Considering the 90-day investment horizon CenterPoint Energy is expected to generate 1.04 times more return on investment than Duke Energy. However, CenterPoint Energy is 1.04 times more volatile than Duke Energy. It trades about 0.16 of its potential returns per unit of risk. Duke Energy is currently generating about -0.08 per unit of risk. If you would invest  2,802  in CenterPoint Energy on September 14, 2024 and sell it today you would earn a total of  339.00  from holding CenterPoint Energy or generate 12.1% return on investment over 90 days.

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

CenterPoint Energy  vs.  Duke Energy

CenterPoint Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, CenterPoint Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Duke Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duke Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Duke Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CenterPoint Energy and Duke Energy

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

The idea behind CenterPoint Energy and Duke 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.