Correlation Between Exelon and DTE Energy

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

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

Diversification Opportunities for Exelon and DTE Energy

0.92

Correlation Coefficient

Exelon  DTE Energy

Almost no diversification

The 3 months correlation between Exelon and DTE is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Exelon and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Exelon 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 Exelon 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 Exelon i.e., Exelon and DTE Energy go up and down completely randomly.

Pair Corralation between Exelon and DTE Energy

Considering the 90-day investment horizon Exelon is expected to generate 1.19 times more return on investment than DTE Energy. However, Exelon is 1.19 times more volatile than DTE Energy. It trades about 0.22 of its potential returns per unit of risk. DTE Energy is currently generating about 0.19 per unit of risk. If you would invest  3,708  in Exelon on December 27, 2024 and sell it today you would earn a total of  694.00  from holding Exelon or generate 18.72% return on investment over 90 days.

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

Exelon  vs.  DTE Energy

Exelon

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exelon are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Exelon exhibited solid returns over the last few months and may actually be approaching a breakup point.

DTE Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DTE Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, DTE Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exelon and DTE Energy

The main advantage of trading using opposite Exelon and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exelon 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 Exelon and DTE Energy 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.