Correlation Between Vast Renewables and DTE Energy

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

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

Diversification Opportunities for Vast Renewables and DTE Energy

-0.15

Correlation Coefficient

Vast Renewables  DTE Energy

Good diversification

The 3 months correlation between Vast and DTE is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Vast Renewables Limited and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Vast Renewables 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 Vast Renewables Limited 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 Vast Renewables i.e., Vast Renewables and DTE Energy go up and down completely randomly.

Pair Corralation between Vast Renewables and DTE Energy

Assuming the 90 days horizon Vast Renewables Limited is expected to generate 14.13 times more return on investment than DTE Energy. However, Vast Renewables is 14.13 times more volatile than DTE Energy. It trades about 0.03 of its potential returns per unit of risk. DTE Energy is currently generating about -0.05 per unit of risk. If you would invest  6.99  in Vast Renewables Limited on November 29, 2024 and sell it today you would lose (1.79) from holding Vast Renewables Limited or give up 25.61% of portfolio value over 90 days.

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

Vast Renewables Limited  vs.  DTE Energy

Vast Renewables

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vast Renewables Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Vast Renewables showed solid returns over the last few months and may actually be approaching a breakup point.

DTE Energy

Risk-Adjusted Performance

Very Weak

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

The main advantage of trading using opposite Vast Renewables and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vast Renewables 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 Vast Renewables Limited 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..