Correlation Between CMS Energy and Entergy
Can any of the company-specific risk be diversified away by investing in both CMS Energy and Entergy 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 Entergy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and Entergy, you can compare the effects of market volatilities on CMS Energy and Entergy 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 Entergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Entergy.
Diversification Opportunities for CMS Energy and Entergy
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between CMS and Entergy is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Entergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy 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 Entergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy has no effect on the direction of CMS Energy i.e., CMS Energy and Entergy go up and down completely randomly.
Pair Corralation between CMS Energy and Entergy
Considering the 90-day investment horizon CMS Energy is expected to under-perform the Entergy. But the stock apears to be less risky and, when comparing its historical volatility, CMS Energy is 3.15 times less risky than Entergy. The stock trades about -0.06 of its potential returns per unit of risk. The Entergy is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 13,522 in Entergy on August 27, 2024 and sell it today you would earn a total of 1,584 from holding Entergy or generate 11.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMS Energy vs. Entergy
Performance |
| Timeline |
| CMS Energy |
| Entergy |
CMS Energy and Entergy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and Entergy
The main advantage of trading using opposite CMS Energy and Entergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Entergy 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 Entergy will offset losses from the drop in Entergy's long position.| CMS Energy vs. Entergy | CMS Energy vs. Ameren Corp | CMS Energy vs. CenterPoint Energy | CMS Energy vs. Alliant Energy Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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