Correlation Between CMS Energy and Emera Incorporated
Can any of the company-specific risk be diversified away by investing in both CMS Energy and Emera Incorporated 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 Emera Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and Emera Incorporated, you can compare the effects of market volatilities on CMS Energy and Emera Incorporated 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 Emera Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Emera Incorporated.
Diversification Opportunities for CMS Energy and Emera Incorporated
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CMS and Emera is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Emera Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emera Incorporated 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 Emera Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emera Incorporated has no effect on the direction of CMS Energy i.e., CMS Energy and Emera Incorporated go up and down completely randomly.
Pair Corralation between CMS Energy and Emera Incorporated
Considering the 90-day investment horizon CMS Energy is expected to generate 0.57 times more return on investment than Emera Incorporated. However, CMS Energy is 1.76 times less risky than Emera Incorporated. It trades about 0.03 of its potential returns per unit of risk. Emera Incorporated is currently generating about 0.02 per unit of risk. If you would invest 6,007 in CMS Energy on September 3, 2024 and sell it today you would earn a total of 964.00 from holding CMS Energy or generate 16.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
CMS Energy vs. Emera Incorporated
Performance |
| Timeline |
| CMS Energy |
| Emera Incorporated |
CMS Energy and Emera Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and Emera Incorporated
The main advantage of trading using opposite CMS Energy and Emera Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Emera Incorporated 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 Emera Incorporated will offset losses from the drop in Emera Incorporated's long position.| CMS Energy vs. Entergy | CMS Energy vs. Ameren Corp | CMS Energy vs. CenterPoint Energy | CMS Energy vs. Alliant Energy Corp |
| Emera Incorporated vs. CMS Energy | Emera Incorporated vs. Ameren Corp | Emera Incorporated vs. Pinnacle West Capital | Emera Incorporated vs. MGE Energy |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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