Correlation Between Entergy New and DTE Energy

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

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

Diversification Opportunities for Entergy New and DTE Energy

0.73

Correlation Coefficient

Entergy New  DTE Energy

Poor diversification

The 3 months correlation between Entergy and DTE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Entergy New Orleans and DTE Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Entergy New 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 Entergy New Orleans are associated (or correlated) with DTE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DTE Energy has no effect on the direction of Entergy New i.e., Entergy New and DTE Energy go up and down completely randomly.

Pair Corralation between Entergy New and DTE Energy

Considering the 90-day investment horizon Entergy New is expected to generate 1.94 times less return on investment than DTE Energy. But when comparing it to its historical volatility, Entergy New Orleans is 1.05 times less risky than DTE Energy. It trades about 0.04 of its potential returns per unit of risk. DTE Energy Co is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,128  in DTE Energy Co on December 27, 2024 and sell it today you would earn a total of  90.00  from holding DTE Energy Co or generate 4.23% return on investment over 90 days.

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

Entergy New Orleans  vs.  DTE Energy Co

Entergy New Orleans

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy New Orleans are ranked lower than 3 (%) 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.

DTE Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DTE Energy Co are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Entergy New and DTE Energy

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

The idea behind Entergy New Orleans and DTE Energy Co 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.