Correlation Between CMS Energy and Fortis
Can any of the company-specific risk be diversified away by investing in both CMS Energy and Fortis 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 Fortis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and Fortis Inc, you can compare the effects of market volatilities on CMS Energy and Fortis 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 Fortis. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Fortis.
Diversification Opportunities for CMS Energy and Fortis
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CMS and Fortis is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Fortis Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortis Inc 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 Fortis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortis Inc has no effect on the direction of CMS Energy i.e., CMS Energy and Fortis go up and down completely randomly.
Pair Corralation between CMS Energy and Fortis
Considering the 90-day investment horizon CMS Energy is expected to generate 1.8 times less return on investment than Fortis. In addition to that, CMS Energy is 1.08 times more volatile than Fortis Inc. It trades about 0.09 of its total potential returns per unit of risk. Fortis Inc is currently generating about 0.18 per unit of volatility. If you would invest 4,284 in Fortis Inc on August 30, 2024 and sell it today you would earn a total of 174.00 from holding Fortis Inc or generate 4.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMS Energy vs. Fortis Inc
Performance |
| Timeline |
| CMS Energy |
| Fortis Inc |
CMS Energy and Fortis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and Fortis
The main advantage of trading using opposite CMS Energy and Fortis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Fortis 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 Fortis will offset losses from the drop in Fortis' long position.| CMS Energy vs. Alliant Energy Corp | CMS Energy vs. Exelon | CMS Energy vs. Evergy, | CMS Energy vs. Pinnacle West Capital |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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