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

0.84

Correlation Coefficient

Ameren Corp  DTE Energy

Very poor diversification

The 3 months correlation between Ameren and DTE is 0.84. 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 2.47 times less return on investment than DTE Energy. But when comparing it to its historical volatility, Ameren Corp is 1.03 times less risky than DTE Energy. It trades about 0.15 of its potential returns per unit of risk. DTE Energy is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  10,613  in DTE Energy on February 11, 2024 and sell it today you would earn a total of  936.00  from holding DTE Energy or generate 8.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Ameren Corp  vs.  DTE Energy

Ameren Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameren Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Ameren Corp may actually be approaching a critical reversion point that can send shares even higher in June 2024.

DTE Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DTE Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, DTE Energy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

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.

The idea behind Ameren Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.