Correlation Between DTE Energy and Ameren Corp

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

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

Diversification Opportunities for DTE Energy and Ameren Corp

0.86

Correlation Coefficient

DTE Energy  Ameren Corp

Very poor diversification

The 3 months correlation between DTE and Ameren is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy and Ameren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Corp 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 are associated (or correlated) with Ameren Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Corp has no effect on the direction of DTE Energy i.e., DTE Energy and Ameren Corp go up and down completely randomly.

Pair Corralation between DTE Energy and Ameren Corp

Considering the 90-day investment horizon DTE Energy is expected to generate 0.88 times more return on investment than Ameren Corp. However, DTE Energy is 1.13 times less risky than Ameren Corp. It trades about 0.19 of its potential returns per unit of risk. Ameren Corp is currently generating about 0.14 per unit of risk. If you would invest  12,037  in DTE Energy on December 27, 2024 and sell it today you would earn a total of  1,535  from holding DTE Energy or generate 12.75% return on investment over 90 days.

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

DTE Energy  vs.  Ameren Corp

DTE Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DTE Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, DTE Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ameren Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameren Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Ameren Corp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with DTE Energy and Ameren Corp

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

The idea behind DTE Energy and Ameren Corp 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.