Correlation Between CMS Energy and Veolia Environnement
Can any of the company-specific risk be diversified away by investing in both CMS Energy and Veolia Environnement 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 Veolia Environnement 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 Veolia Environnement SA, you can compare the effects of market volatilities on CMS Energy and Veolia Environnement 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 Veolia Environnement. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Veolia Environnement.
Diversification Opportunities for CMS Energy and Veolia Environnement
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CMS and Veolia is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy Corp and Veolia Environnement SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veolia Environnement 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 Veolia Environnement. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veolia Environnement has no effect on the direction of CMS Energy i.e., CMS Energy and Veolia Environnement go up and down completely randomly.
Pair Corralation between CMS Energy and Veolia Environnement
Given the investment horizon of 90 days CMS Energy Corp is expected to under-perform the Veolia Environnement. But the stock apears to be less risky and, when comparing its historical volatility, CMS Energy Corp is 1.15 times less risky than Veolia Environnement. The stock trades about -0.08 of its potential returns per unit of risk. The Veolia Environnement SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,395 in Veolia Environnement SA on October 21, 2024 and sell it today you would earn a total of 15.00 from holding Veolia Environnement SA or generate 1.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMS Energy Corp vs. Veolia Environnement SA
Performance |
| Timeline |
| CMS Energy Corp |
| Veolia Environnement |
CMS Energy and Veolia Environnement Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and Veolia Environnement
The main advantage of trading using opposite CMS Energy and Veolia Environnement positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Veolia Environnement 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 Veolia Environnement will offset losses from the drop in Veolia Environnement's 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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