Correlation Between DTE Energy and OGE Energy

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

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

Diversification Opportunities for DTE Energy and OGE Energy

-0.07

Correlation Coefficient

DTE Energy  OGE Energy

Good diversification

The 3 months correlation between DTE and OGE is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy and OGE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OGE Energy 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 OGE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OGE Energy has no effect on the direction of DTE Energy i.e., DTE Energy and OGE Energy go up and down completely randomly.

Pair Corralation between DTE Energy and OGE Energy

Considering the 90-day investment horizon DTE Energy is expected to under-perform the OGE Energy. But the stock apears to be less risky and, when comparing its historical volatility, DTE Energy is 1.27 times less risky than OGE Energy. The stock trades about -0.09 of its potential returns per unit of risk. The OGE Energy is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  4,341  in OGE Energy on October 26, 2024 and sell it today you would lose (4.00) from holding OGE Energy or give up 0.09% of portfolio value over 90 days.

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

DTE Energy  vs.  OGE Energy

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. 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.

OGE Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in OGE Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, OGE Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with DTE Energy and OGE Energy

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

The idea behind DTE Energy and OGE 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.