Correlation Between CMS Energy and Centrais Elétricas
Can any of the company-specific risk be diversified away by investing in both CMS Energy and Centrais Elétricas 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 Centrais Elétricas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and Centrais Eltricas Brasileiras, you can compare the effects of market volatilities on CMS Energy and Centrais Elétricas 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 Centrais Elétricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Centrais Elétricas.
Diversification Opportunities for CMS Energy and Centrais Elétricas
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between CMS and Centrais is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Centrais Eltricas Brasileiras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Elétricas 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 Centrais Elétricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Elétricas has no effect on the direction of CMS Energy i.e., CMS Energy and Centrais Elétricas go up and down completely randomly.
Pair Corralation between CMS Energy and Centrais Elétricas
Considering the 90-day investment horizon CMS Energy is expected to generate 0.71 times more return on investment than Centrais Elétricas. However, CMS Energy is 1.4 times less risky than Centrais Elétricas. It trades about -0.05 of its potential returns per unit of risk. Centrais Eltricas Brasileiras is currently generating about -0.19 per unit of risk. If you would invest 7,062 in CMS Energy on August 27, 2024 and sell it today you would lose (95.00) from holding CMS Energy or give up 1.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMS Energy vs. Centrais Eltricas Brasileiras
Performance |
| Timeline |
| CMS Energy |
| Centrais Elétricas |
CMS Energy and Centrais Elétricas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and Centrais Elétricas
The main advantage of trading using opposite CMS Energy and Centrais Elétricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Centrais Elétricas 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 Centrais Elétricas will offset losses from the drop in Centrais Elétricas' long position.| CMS Energy vs. Entergy | CMS Energy vs. Ameren Corp | CMS Energy vs. CenterPoint Energy | CMS Energy vs. Alliant Energy Corp |
| Centrais Elétricas vs. Nextera Energy | Centrais Elétricas vs. Consumers Energy | Centrais Elétricas vs. Duke Energy | Centrais Elétricas vs. Red Electrica Corporacion |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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