Correlation Between DTE Energy and IDACORP

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

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

Diversification Opportunities for DTE Energy and IDACORP

-0.51

Correlation Coefficient

DTE Energy  IDACORP

Excellent diversification

The 3 months correlation between DTE and IDACORP is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy and IDACORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDACORP 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 IDACORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDACORP has no effect on the direction of DTE Energy i.e., DTE Energy and IDACORP go up and down completely randomly.

Pair Corralation between DTE Energy and IDACORP

Considering the 90-day investment horizon DTE Energy is expected to generate 1.09 times less return on investment than IDACORP. In addition to that, DTE Energy is 1.03 times more volatile than IDACORP. It trades about 0.03 of its total potential returns per unit of risk. IDACORP is currently generating about 0.03 per unit of volatility. If you would invest  10,113  in IDACORP on August 30, 2024 and sell it today you would earn a total of  1,761  from holding IDACORP or generate 17.41% return on investment over 90 days.

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

DTE Energy  vs.  IDACORP

DTE Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DTE Energy are ranked lower than 2 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

IDACORP

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IDACORP are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, IDACORP sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DTE Energy and IDACORP

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

The idea behind DTE Energy and IDACORP 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..