Correlation Between CMS Energy and Endesa SA
Can any of the company-specific risk be diversified away by investing in both CMS Energy and Endesa SA 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 CMS Energy and Endesa SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and Endesa SA ADR, you can compare the effects of market volatilities on CMS Energy and Endesa SA 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 CMS Energy with a short position of Endesa SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Endesa SA.
Diversification Opportunities for CMS Energy and Endesa SA
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between CMS and Endesa is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Endesa SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endesa SA ADR and CMS 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 CMS Energy are associated (or correlated) with Endesa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endesa SA ADR has no effect on the direction of CMS Energy i.e., CMS Energy and Endesa SA go up and down completely randomly.
Pair Corralation between CMS Energy and Endesa SA
Assuming the 90 days trading horizon CMS Energy is expected to generate 1.61 times less return on investment than Endesa SA. But when comparing it to its historical volatility, CMS Energy is 1.12 times less risky than Endesa SA. It trades about 0.02 of its potential returns per unit of risk. Endesa SA ADR is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 995.00 in Endesa SA ADR on August 31, 2024 and sell it today you would earn a total of 103.00 from holding Endesa SA ADR or generate 10.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMS Energy vs. Endesa SA ADR
Performance |
| Timeline |
| CMS Energy |
| Endesa SA ADR |
CMS Energy and Endesa SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and Endesa SA
The main advantage of trading using opposite CMS Energy and Endesa SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Endesa SA 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 Endesa SA will offset losses from the drop in Endesa SA's long position.| CMS Energy vs. Entergy Texas | CMS Energy vs. Duke Energy | CMS Energy vs. Spire Inc | CMS Energy vs. Consumers Energy |
| Endesa SA vs. Equatorial Energia SA | Endesa SA vs. Centrais Electricas Brasileiras | Endesa SA vs. Entergy Texas | Endesa SA vs. IDACORP |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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