Correlation Between CMS Energy and Genie Energy
Can any of the company-specific risk be diversified away by investing in both CMS Energy and Genie Energy 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 Genie Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and Genie Energy, you can compare the effects of market volatilities on CMS Energy and Genie Energy 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 Genie Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Genie Energy.
Diversification Opportunities for CMS Energy and Genie Energy
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between CMS and Genie is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Genie Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genie Energy 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 Genie Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genie Energy has no effect on the direction of CMS Energy i.e., CMS Energy and Genie Energy go up and down completely randomly.
Pair Corralation between CMS Energy and Genie Energy
Considering the 90-day investment horizon CMS Energy is expected to under-perform the Genie Energy. But the stock apears to be less risky and, when comparing its historical volatility, CMS Energy is 1.72 times less risky than Genie Energy. The stock trades about -0.05 of its potential returns per unit of risk. The Genie Energy is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,602 in Genie Energy on August 27, 2024 and sell it today you would earn a total of 2.00 from holding Genie Energy or generate 0.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMS Energy vs. Genie Energy
Performance |
| Timeline |
| CMS Energy |
| Genie Energy |
CMS Energy and Genie Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and Genie Energy
The main advantage of trading using opposite CMS Energy and Genie Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Genie Energy 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 Genie Energy will offset losses from the drop in Genie Energy's long position.| CMS Energy vs. Entergy | CMS Energy vs. Ameren Corp | CMS Energy vs. CenterPoint Energy | CMS Energy vs. Alliant Energy Corp |
| Genie Energy vs. Centrais Electricas Brasileiras | Genie Energy vs. Central Puerto SA | Genie Energy vs. Korea Electric Power | Genie Energy vs. Empresa Distribuidora y |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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