Correlation Between CMS Energy and EDP Energias
Can any of the company-specific risk be diversified away by investing in both CMS Energy and EDP Energias 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 EDP Energias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy Corp and EDP Energias de, you can compare the effects of market volatilities on CMS Energy and EDP Energias 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 EDP Energias. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and EDP Energias.
Diversification Opportunities for CMS Energy and EDP Energias
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CMS and EDP is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy Corp and EDP Energias de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias de 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 Corp are associated (or correlated) with EDP Energias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias de has no effect on the direction of CMS Energy i.e., CMS Energy and EDP Energias go up and down completely randomly.
Pair Corralation between CMS Energy and EDP Energias
Given the investment horizon of 90 days CMS Energy Corp is expected to generate 0.28 times more return on investment than EDP Energias. However, CMS Energy Corp is 3.63 times less risky than EDP Energias. It trades about 0.21 of its potential returns per unit of risk. EDP Energias de is currently generating about -0.16 per unit of risk. If you would invest 2,422 in CMS Energy Corp on September 1, 2024 and sell it today you would earn a total of 66.00 from holding CMS Energy Corp or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
CMS Energy Corp vs. EDP Energias de
Performance |
| Timeline |
| CMS Energy Corp |
| EDP Energias de |
CMS Energy and EDP Energias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and EDP Energias
The main advantage of trading using opposite CMS Energy and EDP Energias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, EDP Energias 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 EDP Energias will offset losses from the drop in EDP Energias' long position.| CMS Energy vs. CMS Energy Corp | CMS Energy vs. DTE Energy Co | CMS Energy vs. CMS Energy Corp | CMS Energy vs. Southern Co |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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