Correlation Between Duke Energy and Duff Phelps

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

Diversification Opportunities for Duke Energy and Duff Phelps

0.67

Correlation Coefficient

Duke Energy  Duff Phelps

Poor diversification

The 3 months correlation between Duke and Duff is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy Corp and Duff Phelps Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duff Phelps Global 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 Duff Phelps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duff Phelps Global has no effect on the direction of Duke Energy i.e., Duke Energy and Duff Phelps go up and down completely randomly.

Pair Corralation between Duke Energy and Duff Phelps

Given the investment horizon of 90 days Duke Energy is expected to generate 1.62 times less return on investment than Duff Phelps. But when comparing it to its historical volatility, Duke Energy Corp is 2.15 times less risky than Duff Phelps. It trades about 0.08 of its potential returns per unit of risk. Duff Phelps Global is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,279  in Duff Phelps Global on December 17, 2024 and sell it today you would earn a total of  56.00  from holding Duff Phelps Global or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Duke Energy Corp  vs.  Duff Phelps Global

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 6 (%) 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.

Duff Phelps Global

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Duff Phelps Global are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Duff Phelps 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 Duff Phelps

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

The idea behind Duke Energy Corp and Duff Phelps Global 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.