Correlation Between Mister Car and DTE Energy

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

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

Diversification Opportunities for Mister Car and DTE Energy

0.13

Correlation Coefficient

Mister Car  DTE Energy

Average diversification

The 3 months correlation between Mister and DTE is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Mister Car Wash, and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Mister Car 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 Mister Car Wash, 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 Mister Car i.e., Mister Car and DTE Energy go up and down completely randomly.

Pair Corralation between Mister Car and DTE Energy

Considering the 90-day investment horizon Mister Car Wash, is expected to generate 2.34 times more return on investment than DTE Energy. However, Mister Car is 2.34 times more volatile than DTE Energy. It trades about 0.12 of its potential returns per unit of risk. DTE Energy is currently generating about 0.02 per unit of risk. If you would invest  733.00  in Mister Car Wash, on December 27, 2024 and sell it today you would earn a total of  114.00  from holding Mister Car Wash, or generate 15.55% return on investment over 90 days.

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

Mister Car Wash,  vs.  DTE Energy

Mister Car Wash,

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mister Car Wash, are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Mister Car showed solid returns over the last few months and may actually be approaching a breakup point.

DTE Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DTE Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, DTE Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Mister Car and DTE Energy

The main advantage of trading using opposite Mister Car and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mister Car 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 Mister Car Wash, 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.