Correlation Between Huaneng Power and DTE Energy

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Can any of the company-specific risk be diversified away by investing in both Huaneng Power 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 Huaneng Power and DTE Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Huaneng Power International and DTE Energy, you can compare the effects of market volatilities on Huaneng Power 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 Huaneng Power with a short position of DTE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Huaneng Power and DTE Energy.

Diversification Opportunities for Huaneng Power and DTE Energy

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  Correlation Coefficient

Pay attention - limited upside

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

Pair Corralation between Huaneng Power and DTE Energy

If you would invest  10,709  in DTE Energy on December 30, 2023 and sell it today you would earn a total of  505.00  from holding DTE Energy or generate 4.72% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Huaneng Power International  vs.  DTE Energy

 Performance 
       Timeline  
Huaneng Power Intern 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Huaneng Power International has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Huaneng Power is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
DTE Energy 

Risk-Adjusted Performance

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High
Insignificant
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. In spite of rather sound basic indicators, DTE Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Huaneng Power and DTE Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Huaneng Power and DTE Energy

The main advantage of trading using opposite Huaneng Power and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Huaneng Power 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 Huaneng Power International 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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