Correlation Between CMS Energy and SPACE
Can any of the company-specific risk be diversified away by investing in both CMS Energy and SPACE 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 SPACE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and SPACE, you can compare the effects of market volatilities on CMS Energy and SPACE 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 SPACE. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and SPACE.
Diversification Opportunities for CMS Energy and SPACE
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between CMS and SPACE is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and SPACE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPACE 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 SPACE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPACE has no effect on the direction of CMS Energy i.e., CMS Energy and SPACE go up and down completely randomly.
Pair Corralation between CMS Energy and SPACE
Assuming the 90 days trading horizon CMS Energy is expected to generate 736.96 times less return on investment than SPACE. But when comparing it to its historical volatility, CMS Energy is 138.59 times less risky than SPACE. It trades about 0.03 of its potential returns per unit of risk. SPACE is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 0.00 in SPACE on September 3, 2024 and sell it today you would earn a total of 59.00 from holding SPACE or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 61.82% |
| Values | Daily Returns |
CMS Energy vs. SPACE
Performance |
| Timeline |
| CMS Energy |
| SPACE |
CMS Energy and SPACE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and SPACE
The main advantage of trading using opposite CMS Energy and SPACE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, SPACE 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 SPACE will offset losses from the drop in SPACE's long position.The idea behind CMS Energy and SPACE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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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