Correlation Between DTE Energy and Entergy New

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

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

Diversification Opportunities for DTE Energy and Entergy New

0.63

Correlation Coefficient

DTE Energy  Entergy New

Poor diversification

The 3 months correlation between DTE and Entergy is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy Co and Entergy New Orleans in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy New Orleans 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 Co are associated (or correlated) with Entergy New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy New Orleans has no effect on the direction of DTE Energy i.e., DTE Energy and Entergy New go up and down completely randomly.

Pair Corralation between DTE Energy and Entergy New

Considering the 90-day investment horizon DTE Energy Co is expected to under-perform the Entergy New. But the stock apears to be less risky and, when comparing its historical volatility, DTE Energy Co is 1.92 times less risky than Entergy New. The stock trades about -0.04 of its potential returns per unit of risk. The Entergy New Orleans is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,279  in Entergy New Orleans on August 30, 2024 and sell it today you would earn a total of  26.00  from holding Entergy New Orleans or generate 1.14% return on investment over 90 days.

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

DTE Energy Co  vs.  Entergy New Orleans

DTE Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DTE Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, DTE Energy is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Entergy New Orleans

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy New Orleans are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Entergy New is not utilizing all of its potentials. The recent stock price chaos, may contribute to medium-term losses for the stakeholders.

Pair Trading with DTE Energy and Entergy New

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

The idea behind DTE Energy Co and Entergy New Orleans 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.