Correlation Between Duke Energy and Hennessy Gas

Can any of the company-specific risk be diversified away by investing in both Duke Energy and Hennessy Gas 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 Hennessy Gas 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 Hennessy Gas Utility, you can compare the effects of market volatilities on Duke Energy and Hennessy Gas 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 Hennessy Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duke Energy and Hennessy Gas.

Diversification Opportunities for Duke Energy and Hennessy Gas

0.58

Correlation Coefficient

Duke Energy  Hennessy Gas

Very weak diversification

The 3 months correlation between Duke and Hennessy is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy Corp and Hennessy Gas Utility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hennessy Gas Utility 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 Hennessy Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hennessy Gas Utility has no effect on the direction of Duke Energy i.e., Duke Energy and Hennessy Gas go up and down completely randomly.

Pair Corralation between Duke Energy and Hennessy Gas

Given the investment horizon of 90 days Duke Energy Corp is expected to generate 0.44 times more return on investment than Hennessy Gas. However, Duke Energy Corp is 2.26 times less risky than Hennessy Gas. It trades about 0.22 of its potential returns per unit of risk. Hennessy Gas Utility is currently generating about 0.08 per unit of risk. If you would invest  2,452  in Duke Energy Corp on December 4, 2024 and sell it today you would earn a total of  40.00  from holding Duke Energy Corp or generate 1.63% return on investment over 90 days.

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

Duke Energy Corp  vs.  Hennessy Gas Utility

Duke Energy Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Duke Energy Corp are ranked lower than 4 (%) 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.

Hennessy Gas Utility

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hennessy Gas Utility has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Hennessy Gas is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Duke Energy and Hennessy Gas

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

The idea behind Duke Energy Corp and Hennessy Gas Utility 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.