Correlation Between CenterPoint Energy and DTE Energy

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

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

Diversification Opportunities for CenterPoint Energy and DTE Energy

0.92

Correlation Coefficient

CenterPoint Energy  DTE Energy

Almost no diversification

The 3 months correlation between CenterPoint and DTE is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and DTE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DTE Energy and CenterPoint 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 CenterPoint Energy 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 CenterPoint Energy i.e., CenterPoint Energy and DTE Energy go up and down completely randomly.

Pair Corralation between CenterPoint Energy and DTE Energy

Considering the 90-day investment horizon CenterPoint Energy is expected to generate 0.88 times more return on investment than DTE Energy. However, CenterPoint Energy is 1.14 times less risky than DTE Energy. It trades about 0.19 of its potential returns per unit of risk. DTE Energy is currently generating about 0.12 per unit of risk. If you would invest  3,141  in CenterPoint Energy on January 11, 2025 and sell it today you would earn a total of  478.00  from holding CenterPoint Energy or generate 15.22% return on investment over 90 days.

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

CenterPoint Energy  vs.  DTE Energy

CenterPoint Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, CenterPoint Energy reported solid returns over the last few months and may actually be approaching a breakup point.

DTE Energy

Risk-Adjusted Performance

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 uncertain basic indicators, DTE Energy may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with CenterPoint Energy and DTE Energy

The main advantage of trading using opposite CenterPoint Energy and DTE Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy 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 CenterPoint Energy 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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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..