Correlation Between CMS Energy and Exelon
Can any of the company-specific risk be diversified away by investing in both CMS Energy and Exelon 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 Exelon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and Exelon, you can compare the effects of market volatilities on CMS Energy and Exelon 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 Exelon. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Exelon.
Diversification Opportunities for CMS Energy and Exelon
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between CMS and Exelon is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Exelon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exelon 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 Exelon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exelon has no effect on the direction of CMS Energy i.e., CMS Energy and Exelon go up and down completely randomly.
Pair Corralation between CMS Energy and Exelon
Considering the 90-day investment horizon CMS Energy is expected to generate 1.06 times more return on investment than Exelon. However, CMS Energy is 1.06 times more volatile than Exelon. It trades about -0.06 of its potential returns per unit of risk. Exelon is currently generating about -0.07 per unit of risk. If you would invest 7,049 in CMS Energy on August 23, 2024 and sell it today you would lose (128.00) from holding CMS Energy or give up 1.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMS Energy vs. Exelon
Performance |
| Timeline |
| CMS Energy |
| Exelon |
CMS Energy and Exelon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and Exelon
The main advantage of trading using opposite CMS Energy and Exelon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Exelon 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 Exelon will offset losses from the drop in Exelon's long position.| CMS Energy vs. Entergy | CMS Energy vs. Ameren Corp | CMS Energy vs. CenterPoint Energy | CMS Energy vs. Alliant Energy Corp |
| Exelon vs. Duke Energy | Exelon vs. Dominion Energy | Exelon vs. Southern Company | Exelon vs. Consolidated Edison |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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