Correlation Between Brookfield Renewable and CMS Energy
Can any of the company-specific risk be diversified away by investing in both Brookfield Renewable and CMS 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 Brookfield Renewable and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brookfield Renewable Partners and CMS Energy, you can compare the effects of market volatilities on Brookfield Renewable and CMS 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 Brookfield Renewable with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brookfield Renewable and CMS Energy.
Diversification Opportunities for Brookfield Renewable and CMS Energy
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Brookfield and CMS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Brookfield Renewable Partners and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy and Brookfield Renewable 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 Brookfield Renewable Partners are associated (or correlated) with CMS Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMS Energy has no effect on the direction of Brookfield Renewable i.e., Brookfield Renewable and CMS Energy go up and down completely randomly.
Pair Corralation between Brookfield Renewable and CMS Energy
Assuming the 90 days trading horizon Brookfield Renewable Partners is expected to under-perform the CMS Energy. In addition to that, Brookfield Renewable is 1.91 times more volatile than CMS Energy. It trades about -0.12 of its total potential returns per unit of risk. CMS Energy is currently generating about -0.14 per unit of volatility. If you would invest 2,008 in CMS Energy on August 28, 2024 and sell it today you would lose (61.00) from holding CMS Energy or give up 3.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brookfield Renewable Partners vs. CMS Energy
Performance |
| Timeline |
| Brookfield Renewable |
| CMS Energy |
Brookfield Renewable and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brookfield Renewable and CMS Energy
The main advantage of trading using opposite Brookfield Renewable and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brookfield Renewable position performs unexpectedly, CMS 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 CMS Energy will offset losses from the drop in CMS Energy's long position.| Brookfield Renewable vs. Brookfield Infrastructure Partners | Brookfield Renewable vs. Brookfield Infrastructure Partners | Brookfield Renewable vs. Entergy Texas | Brookfield Renewable vs. Duke Energy |
| CMS Energy vs. Entergy Texas | CMS Energy vs. Duke Energy | CMS Energy vs. Spire Inc | CMS Energy vs. Consumers Energy |
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 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.
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