Correlation Between Consumers Energy and Spire
Can any of the company-specific risk be diversified away by investing in both Consumers Energy and Spire 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 Spire into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumers Energy and Spire Inc, you can compare the effects of market volatilities on Consumers Energy and Spire 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 Spire. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumers Energy and Spire.
Diversification Opportunities for Consumers Energy and Spire
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Consumers and Spire is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy and Spire Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Inc 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 Spire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Inc has no effect on the direction of Consumers Energy i.e., Consumers Energy and Spire go up and down completely randomly.
Pair Corralation between Consumers Energy and Spire
Assuming the 90 days trading horizon Consumers Energy is expected to under-perform the Spire. In addition to that, Consumers Energy is 2.37 times more volatile than Spire Inc. It trades about -0.21 of its total potential returns per unit of risk. Spire Inc is currently generating about 0.0 per unit of volatility. If you would invest 2,468 in Spire Inc on August 27, 2024 and sell it today you would lose (2.00) from holding Spire Inc or give up 0.08% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumers Energy vs. Spire Inc
Performance |
| Timeline |
| Consumers Energy |
| Spire Inc |
Consumers Energy and Spire Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumers Energy and Spire
The main advantage of trading using opposite Consumers Energy and Spire positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumers Energy position performs unexpectedly, Spire 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 Spire will offset losses from the drop in Spire's long position.| Consumers Energy vs. Nextera Energy | Consumers Energy vs. Duke Energy | Consumers Energy vs. PGE Corp | Consumers Energy vs. Southern Company |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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