Correlation Between Consolidated Edison and DTE Energy

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

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

Diversification Opportunities for Consolidated Edison and DTE Energy

-0.7

Correlation Coefficient

Consolidated Edison  DTE Energy

Excellent diversification

The 3 months correlation between Consolidated and DTE is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and DTE Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Consolidated Edison 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 Consolidated Edison 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 Consolidated Edison i.e., Consolidated Edison and DTE Energy go up and down completely randomly.

Pair Corralation between Consolidated Edison and DTE Energy

Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 1.11 times more return on investment than DTE Energy. However, Consolidated Edison is 1.11 times more volatile than DTE Energy Co. It trades about 0.05 of its potential returns per unit of risk. DTE Energy Co is currently generating about -0.06 per unit of risk. If you would invest  8,917  in Consolidated Edison on March 12, 2024 and sell it today you would earn a total of  244.00  from holding Consolidated Edison or generate 2.74% return on investment over 90 days.

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

Consolidated Edison  vs.  DTE Energy Co

Consolidated Edison

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Edison are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Consolidated Edison is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

DTE Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

The main advantage of trading using opposite Consolidated Edison and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison 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 Consolidated Edison 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.