Correlation Between Sunnova Energy and DTE Energy

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

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

Diversification Opportunities for Sunnova Energy and DTE Energy

0.52

Correlation Coefficient

Sunnova Energy  DTE Energy

Very weak diversification

The 3 months correlation between Sunnova and DTE is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Sunnova Energy International and DTE Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Sunnova 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 Sunnova Energy International 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 Sunnova Energy i.e., Sunnova Energy and DTE Energy go up and down completely randomly.

Pair Corralation between Sunnova Energy and DTE Energy

Given the investment horizon of 90 days Sunnova Energy International is expected to under-perform the DTE Energy. In addition to that, Sunnova Energy is 5.31 times more volatile than DTE Energy Co. It trades about -0.06 of its total potential returns per unit of risk. DTE Energy Co is currently generating about 0.2 per unit of volatility. If you would invest  2,182  in DTE Energy Co on October 27, 2024 and sell it today you would earn a total of  110.00  from holding DTE Energy Co or generate 5.04% return on investment over 90 days.

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

Sunnova Energy International  vs.  DTE Energy Co

Sunnova Energy Inter

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunnova Energy International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DTE Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DTE Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Sunnova Energy and DTE Energy

The main advantage of trading using opposite Sunnova Energy and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunnova Energy 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 Sunnova Energy International 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.