Correlation Between DTE Energy and Boyd Group

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

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

Diversification Opportunities for DTE Energy and Boyd Group

0.84

Correlation Coefficient

DTE Energy  Boyd Group

Very poor diversification

The 3 months correlation between DTE and Boyd is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding DTE Energy and Boyd Group Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boyd Group Services and DTE Energy 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 DTE Energy are associated (or correlated) with Boyd Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boyd Group Services has no effect on the direction of DTE Energy i.e., DTE Energy and Boyd Group go up and down completely randomly.

Pair Corralation between DTE Energy and Boyd Group

Considering the 90-day investment horizon DTE Energy is expected to generate 0.64 times more return on investment than Boyd Group. However, DTE Energy is 1.57 times less risky than Boyd Group. It trades about -0.14 of its potential returns per unit of risk. Boyd Group Services is currently generating about -0.26 per unit of risk. If you would invest  2,100  in DTE Energy on February 14, 2024 and sell it today you would lose (153.00) from holding DTE Energy or give up 7.29% of portfolio value over 90 days.

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

DTE Energy  vs.  Boyd Group Services

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.

Boyd Group Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boyd Group Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with DTE Energy and Boyd Group

The main advantage of trading using opposite DTE Energy and Boyd Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DTE Energy position performs unexpectedly, Boyd Group 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 Boyd Group will offset losses from the drop in Boyd Group's long position.

The idea behind DTE Energy and Boyd Group Services 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.