Correlation Between Duke Energy and Equitable Holdings

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

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

Diversification Opportunities for Duke Energy and Equitable Holdings

0.79

Correlation Coefficient

Duke Energy  Equitable Holdings

Poor diversification

The 3 months correlation between Duke and Equitable is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy and Equitable Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equitable Holdings and Duke 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 Duke Energy are associated (or correlated) with Equitable Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equitable Holdings has no effect on the direction of Duke Energy i.e., Duke Energy and Equitable Holdings go up and down completely randomly.

Pair Corralation between Duke Energy and Equitable Holdings

Assuming the 90 days trading horizon Duke Energy is expected to generate 2.2 times less return on investment than Equitable Holdings. But when comparing it to its historical volatility, Duke Energy is 1.53 times less risky than Equitable Holdings. It trades about 0.11 of its potential returns per unit of risk. Equitable Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,399  in Equitable Holdings on February 15, 2024 and sell it today you would earn a total of  387.00  from holding Equitable Holdings or generate 27.66% return on investment over 90 days.

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

Duke Energy  vs.  Equitable Holdings

Duke Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Duke Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, Duke Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Equitable Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equitable Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Equitable Holdings is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Duke Energy and Equitable Holdings

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

The idea behind Duke Energy and Equitable Holdings 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.