Correlation Between Duke Energy and United States

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

Diversification Opportunities for Duke Energy and United States

0.39

Correlation Coefficient

Duke Energy  United States

Weak diversification

The 3 months correlation between Duke and United is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy Corp and United States Cellular in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Cellular 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Cellular has no effect on the direction of Duke Energy i.e., Duke Energy and United States go up and down completely randomly.

Pair Corralation between Duke Energy and United States

Given the investment horizon of 90 days Duke Energy Corp is expected to under-perform the United States. But the stock apears to be less risky and, when comparing its historical volatility, Duke Energy Corp is 1.08 times less risky than United States. The stock trades about -0.04 of its potential returns per unit of risk. The United States Cellular is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,225  in United States Cellular on October 27, 2024 and sell it today you would lose (14.00) from holding United States Cellular or give up 0.63% of portfolio value over 90 days.

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

Duke Energy Corp  vs.  United States Cellular

Duke Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duke Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

United States Cellular

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Cellular has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, United States is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Duke Energy and United States

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

The idea behind Duke Energy Corp and United States Cellular 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.