Correlation Between Thor Industries and DTE Energy

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

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

Diversification Opportunities for Thor Industries and DTE Energy

0.81

Correlation Coefficient

Thor Industries DTE Energy

Very poor diversification

The 3 months correlation between Thor Industries and DTE Energy is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Thor Industries and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and Thor Industries 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 Thor Industries 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 Thor Industries i.e., Thor Industries and DTE Energy go up and down completely randomly.

Pair Corralation between Thor Industries and DTE Energy

Considering the 90-day investment horizon Thor Industries is expected to generate 1.2 times less return on investment than DTE Energy. In addition to that, Thor Industries is 1.95 times more volatile than DTE Energy. It trades about 0.05 of its total potential returns per unit of risk. DTE Energy is currently generating about 0.11 per unit of volatility. If you would invest  1,805  in DTE Energy on December 22, 2022 and sell it today you would earn a total of  155.00  from holding DTE Energy or generate 8.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Thor Industries  vs.  DTE Energy

Thor Industries

Thor Industries Performance

3 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in Thor Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, Thor Industries may actually be approaching a critical reversion point that can send shares even higher in April 2023.

DTE Energy

DTE Energy Performance

8 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in DTE Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting basic indicators, DTE Energy may actually be approaching a critical reversion point that can send shares even higher in April 2023.

Pair Trading with Thor Industries and DTE Energy

The main advantage of trading using opposite Thor Industries and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Thor Industries 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.

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The idea behind Thor Industries 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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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 Probability Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.