Correlation Between Bellus Health and Dte Energy

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Can any of the company-specific risk be diversified away by investing in both Bellus Health 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 Bellus Health and Dte Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bellus Health and Dte Energy, you can compare the effects of market volatilities on Bellus Health 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 Bellus Health with a short position of Dte Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bellus Health and Dte Energy.

Diversification Opportunities for Bellus Health and Dte Energy

0.89
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Bellus and Dte Energy is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bellus Health and Dte Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dte Energy and Bellus Health 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 Bellus Health 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 Bellus Health i.e., Bellus Health and Dte Energy go up and down completely randomly.

Pair Corralation between Bellus Health and Dte Energy

Considering the 90-day investment horizon Bellus Health is expected to generate 3.79 times more return on investment than Dte Energy. However, Bellus Health is 3.79 times more volatile than Dte Energy. It trades about 0.07 of its potential returns per unit of risk. Dte Energy is currently generating about 0.03 per unit of risk. If you would invest  330.00  in Bellus Health on August 30, 2022 and sell it today you would earn a total of  580.00  from holding Bellus Health or generate 175.76% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Bellus Health  vs.  Dte Energy

 Performance (%) 
       Timeline  
Bellus Health 
Bellus Performance
0 of 100
Over the last 90 days Bellus Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Bellus Price Channel

Dte Energy 
Dte Energy Performance
0 of 100
Over the last 90 days Dte Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Dte Energy Price Channel

Bellus Health and Dte Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bellus Health and Dte Energy

The main advantage of trading using opposite Bellus Health and Dte Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bellus Health 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 Bellus Health 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 Price Transformation module to use Price Transformation models to analyze depth of different equity instruments across global markets.

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