Correlation Between Duke Energy and Cadiz Depositary

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

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

Diversification Opportunities for Duke Energy and Cadiz Depositary

0.71

Correlation Coefficient

Duke Energy  Cadiz Depositary

Poor diversification

The 3 months correlation between Duke and Cadiz is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy Corp and Cadiz Depositary Shares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadiz Depositary Shares and Duke 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 Duke Energy Corp are associated (or correlated) with Cadiz Depositary. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadiz Depositary Shares has no effect on the direction of Duke Energy i.e., Duke Energy and Cadiz Depositary go up and down completely randomly.

Pair Corralation between Duke Energy and Cadiz Depositary

Given the investment horizon of 90 days Duke Energy is expected to generate 2.59 times less return on investment than Cadiz Depositary. But when comparing it to its historical volatility, Duke Energy Corp is 1.75 times less risky than Cadiz Depositary. It trades about 0.14 of its potential returns per unit of risk. Cadiz Depositary Shares is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,695  in Cadiz Depositary Shares on December 28, 2024 and sell it today you would earn a total of  212.00  from holding Cadiz Depositary Shares or generate 12.51% return on investment over 90 days.

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

Duke Energy Corp  vs.  Cadiz Depositary Shares

Duke Energy Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Duke Energy Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Duke Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Cadiz Depositary Shares

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cadiz Depositary Shares are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Cadiz Depositary reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Duke Energy and Cadiz Depositary

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

The idea behind Duke Energy Corp and Cadiz Depositary Shares 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.