Correlation Between CMS Energy and Equatorial Energia
Can any of the company-specific risk be diversified away by investing in both CMS Energy and Equatorial Energia 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 Equatorial Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and Equatorial Energia SA, you can compare the effects of market volatilities on CMS Energy and Equatorial Energia 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 Equatorial Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Equatorial Energia.
Diversification Opportunities for CMS Energy and Equatorial Energia
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CMS and Equatorial is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Equatorial Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equatorial Energia 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 Equatorial Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equatorial Energia has no effect on the direction of CMS Energy i.e., CMS Energy and Equatorial Energia go up and down completely randomly.
Pair Corralation between CMS Energy and Equatorial Energia
Assuming the 90 days trading horizon CMS Energy is expected to generate 28.87 times less return on investment than Equatorial Energia. But when comparing it to its historical volatility, CMS Energy is 2.79 times less risky than Equatorial Energia. It trades about 0.03 of its potential returns per unit of risk. Equatorial Energia SA is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 465.00 in Equatorial Energia SA on November 9, 2024 and sell it today you would earn a total of 85.00 from holding Equatorial Energia SA or generate 18.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMS Energy vs. Equatorial Energia SA
Performance |
| Timeline |
| CMS Energy |
| Equatorial Energia |
CMS Energy and Equatorial Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and Equatorial Energia
The main advantage of trading using opposite CMS Energy and Equatorial Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Equatorial Energia 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 Equatorial Energia will offset losses from the drop in Equatorial Energia's long position.| CMS Energy vs. Entergy Texas | CMS Energy vs. Duke Energy | CMS Energy vs. Spire Inc | CMS Energy vs. Consumers Energy |
| Equatorial Energia vs. Dominion Energy | Equatorial Energia vs. Centrais Electricas Brasileiras | Equatorial Energia vs. Enel Chile SA | Equatorial Energia vs. Edison International |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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