Correlation Between CMS Energy and Connecticut Light
Can any of the company-specific risk be diversified away by investing in both CMS Energy and Connecticut Light 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 Connecticut Light into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and The Connecticut Light, you can compare the effects of market volatilities on CMS Energy and Connecticut Light 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 Connecticut Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Connecticut Light.
Diversification Opportunities for CMS Energy and Connecticut Light
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CMS and Connecticut is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and The Connecticut Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connecticut Light 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 Connecticut Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connecticut Light has no effect on the direction of CMS Energy i.e., CMS Energy and Connecticut Light go up and down completely randomly.
Pair Corralation between CMS Energy and Connecticut Light
Considering the 90-day investment horizon CMS Energy is expected to generate 0.33 times more return on investment than Connecticut Light. However, CMS Energy is 3.07 times less risky than Connecticut Light. It trades about -0.12 of its potential returns per unit of risk. The Connecticut Light is currently generating about -0.06 per unit of risk. If you would invest 6,766 in CMS Energy on October 11, 2024 and sell it today you would lose (136.00) from holding CMS Energy or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
CMS Energy vs. The Connecticut Light
Performance |
| Timeline |
| CMS Energy |
| Connecticut Light |
CMS Energy and Connecticut Light Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and Connecticut Light
The main advantage of trading using opposite CMS Energy and Connecticut Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Connecticut Light 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 Connecticut Light will offset losses from the drop in Connecticut Light's long position.| CMS Energy vs. Entergy | CMS Energy vs. Ameren Corp | CMS Energy vs. CenterPoint Energy | CMS Energy vs. Alliant Energy Corp |
| Connecticut Light vs. NH Foods Ltd | Connecticut Light vs. ServiceNow | Connecticut Light vs. Cadence Design Systems | Connecticut Light vs. Rackspace Technology |
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 Stocks Directory module to find actively traded stocks across global markets.
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