Correlation Between Ameren Corp and DTE Energy
Can any of the company-specific risk be diversified away by investing in both Ameren Corp 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 Ameren Corp and DTE Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ameren Corp and DTE Energy, you can compare the effects of market volatilities on Ameren Corp 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 Ameren Corp with a short position of DTE Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameren Corp and DTE Energy.
Diversification Opportunities for Ameren Corp and DTE Energy
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ameren and DTE is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Ameren Corp and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Ameren Corp 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 Ameren Corp 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 Ameren Corp i.e., Ameren Corp and DTE Energy go up and down completely randomly.
Pair Corralation between Ameren Corp and DTE Energy
Considering the 90-day investment horizon Ameren Corp is expected to generate 1.04 times less return on investment than DTE Energy. But when comparing it to its historical volatility, Ameren Corp is 1.19 times less risky than DTE Energy. It trades about 0.13 of its potential returns per unit of risk. DTE Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 10,262 in DTE Energy on January 26, 2024 and sell it today you would earn a total of 893.00 from holding DTE Energy or generate 8.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ameren Corp vs. DTE Energy
Performance |
| Timeline |
| Ameren Corp |
| DTE Energy |
Ameren Corp and DTE Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ameren Corp and DTE Energy
The main advantage of trading using opposite Ameren Corp and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameren Corp 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.| Ameren Corp vs. Southern Company | Ameren Corp vs. American Electric Power | Ameren Corp vs. Nextera Energy | Ameren Corp vs. Duke Energy |
| DTE Energy vs. Southern Company | DTE Energy vs. American Electric Power | DTE Energy vs. Nextera Energy | DTE Energy vs. Duke Energy |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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