Correlation Between PNM Old and DTE Energy

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

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

Diversification Opportunities for PNM Old and DTE Energy

0.0

Correlation Coefficient

PNM Old  DTE Energy

Pay attention - limited upside

The 3 months correlation between PNM and DTE is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PNM Old and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and PNM Old 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 PNM Old 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 PNM Old i.e., PNM Old and DTE Energy go up and down completely randomly.

Pair Corralation between PNM Old and DTE Energy

If you would invest  12,187  in DTE Energy on December 3, 2024 and sell it today you would earn a total of  1,337  from holding DTE Energy or generate 10.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

PNM Old  vs.  DTE Energy

PNM Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days PNM Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PNM Old is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

DTE Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DTE Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, DTE Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with PNM Old and DTE Energy

The main advantage of trading using opposite PNM Old and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PNM Old 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 PNM Old 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.