Correlation Between Consumers Energy and Clearway Energy
Can any of the company-specific risk be diversified away by investing in both Consumers Energy and Clearway 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 Consumers Energy and Clearway Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumers Energy and Clearway Energy, you can compare the effects of market volatilities on Consumers Energy and Clearway 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 Consumers Energy with a short position of Clearway Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumers Energy and Clearway Energy.
Diversification Opportunities for Consumers Energy and Clearway Energy
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between Consumers and Clearway is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy and Clearway Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearway Energy and Consumers 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 Consumers Energy are associated (or correlated) with Clearway Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearway Energy has no effect on the direction of Consumers Energy i.e., Consumers Energy and Clearway Energy go up and down completely randomly.
Pair Corralation between Consumers Energy and Clearway Energy
Assuming the 90 days trading horizon Consumers Energy is expected to generate 1.06 times less return on investment than Clearway Energy. But when comparing it to its historical volatility, Consumers Energy is 1.25 times less risky than Clearway Energy. It trades about 0.01 of its potential returns per unit of risk. Clearway Energy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,708 in Clearway Energy on September 5, 2024 and sell it today you would lose (49.00) from holding Clearway Energy or give up 1.81% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumers Energy vs. Clearway Energy
Performance |
| Timeline |
| Consumers Energy |
| Clearway Energy |
Consumers Energy and Clearway Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumers Energy and Clearway Energy
The main advantage of trading using opposite Consumers Energy and Clearway Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumers Energy position performs unexpectedly, Clearway 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 Clearway Energy will offset losses from the drop in Clearway Energy's long position.| Consumers Energy vs. Nextera Energy | Consumers Energy vs. Duke Energy | Consumers Energy vs. PGE Corp | Consumers Energy vs. Southern Company |
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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 the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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