Correlation Between HR Block and DTE Energy

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

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

Diversification Opportunities for HR Block and DTE Energy

0.28

Correlation Coefficient

HR Block  DTE Energy

Modest diversification

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

Pair Corralation between HR Block and DTE Energy

Considering the 90-day investment horizon HR Block is expected to generate 0.97 times more return on investment than DTE Energy. However, HR Block is 1.03 times less risky than DTE Energy. It trades about -0.02 of its potential returns per unit of risk. DTE Energy is currently generating about -0.35 per unit of risk. If you would invest  4,668  in HR Block on January 17, 2024 and sell it today you would lose (36.00) from holding HR Block or give up 0.77% of portfolio value over 90 days.

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

HR Block  vs.  DTE Energy

HR Block

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HR Block are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HR Block is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

DTE Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DTE Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HR Block and DTE Energy

The main advantage of trading using opposite HR Block and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HR Block 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 HR Block 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.