Correlation Between CMS Energy and PGE Corp
Can any of the company-specific risk be diversified away by investing in both CMS Energy and PGE Corp 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 PGE Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and PGE Corp, you can compare the effects of market volatilities on CMS Energy and PGE Corp 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 PGE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and PGE Corp.
Diversification Opportunities for CMS Energy and PGE Corp
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CMS and PGE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and PGE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE Corp 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 PGE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corp has no effect on the direction of CMS Energy i.e., CMS Energy and PGE Corp go up and down completely randomly.
Pair Corralation between CMS Energy and PGE Corp
Assuming the 90 days trading horizon CMS Energy is expected to generate 0.9 times more return on investment than PGE Corp. However, CMS Energy is 1.11 times less risky than PGE Corp. It trades about 0.02 of its potential returns per unit of risk. PGE Corp is currently generating about 0.01 per unit of risk. If you would invest 1,673 in CMS Energy on November 9, 2024 and sell it today you would earn a total of 138.00 from holding CMS Energy or generate 8.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMS Energy vs. PGE Corp
Performance |
| Timeline |
| CMS Energy |
| PGE Corp |
CMS Energy and PGE Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and PGE Corp
The main advantage of trading using opposite CMS Energy and PGE Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, PGE Corp 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 PGE Corp will offset losses from the drop in PGE Corp's long position.| CMS Energy vs. Entergy Texas | CMS Energy vs. Duke Energy | CMS Energy vs. Spire Inc | CMS Energy vs. Consumers Energy |
| PGE Corp vs. Consolidated Edison | PGE Corp vs. Southern Company | PGE Corp vs. Entergy | PGE Corp vs. Pinnacle West Capital |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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