Correlation Between United States and DTE Energy

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

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

Diversification Opportunities for United States and DTE Energy

0.28

Correlation Coefficient

United States  DTE Energy

Modest diversification

The 3 months correlation between United and DTE is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding United States Cellular and DTE Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and United States 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 United States Cellular 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 United States i.e., United States and DTE Energy go up and down completely randomly.

Pair Corralation between United States and DTE Energy

Considering the 90-day investment horizon United States is expected to generate 2.66 times less return on investment than DTE Energy. But when comparing it to its historical volatility, United States Cellular is 1.45 times less risky than DTE Energy. It trades about 0.05 of its potential returns per unit of risk. DTE Energy Co is currently generating about 0.1 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  119.00  from holding DTE Energy Co or generate 5.59% return on investment over 90 days.

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

United States Cellular  vs.  DTE Energy Co

United States Cellular

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, United States is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 7 (%) 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 United States and DTE Energy

The main advantage of trading using opposite United States and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 United States Cellular 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.