Correlation Between CMS Energy and Brighthouse Financial
Can any of the company-specific risk be diversified away by investing in both CMS Energy and Brighthouse Financial 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 Brighthouse Financial 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 Brighthouse Financial, you can compare the effects of market volatilities on CMS Energy and Brighthouse Financial 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 Brighthouse Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Brighthouse Financial.
Diversification Opportunities for CMS Energy and Brighthouse Financial
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CMS and Brighthouse is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy Corp and Brighthouse Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brighthouse Financial 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 Brighthouse Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brighthouse Financial has no effect on the direction of CMS Energy i.e., CMS Energy and Brighthouse Financial go up and down completely randomly.
Pair Corralation between CMS Energy and Brighthouse Financial
Given the investment horizon of 90 days CMS Energy Corp is expected to generate 0.57 times more return on investment than Brighthouse Financial. However, CMS Energy Corp is 1.76 times less risky than Brighthouse Financial. It trades about -0.03 of its potential returns per unit of risk. Brighthouse Financial is currently generating about -0.08 per unit of risk. If you would invest 2,459 in CMS Energy Corp on August 31, 2024 and sell it today you would lose (7.00) from holding CMS Energy Corp or give up 0.28% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMS Energy Corp vs. Brighthouse Financial
Performance |
| Timeline |
| CMS Energy Corp |
| Brighthouse Financial |
CMS Energy and Brighthouse Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and Brighthouse Financial
The main advantage of trading using opposite CMS Energy and Brighthouse Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Brighthouse Financial 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 Brighthouse Financial will offset losses from the drop in Brighthouse Financial's long position.| CMS Energy vs. Southern Company Series | CMS Energy vs. DTE Energy Co | CMS Energy vs. Affiliated Managers Group, | CMS Energy vs. United States Cellular |
| Brighthouse Financial vs. Brighthouse Financial | Brighthouse Financial vs. Unum Group | Brighthouse Financial vs. Argo Group 65 | Brighthouse Financial vs. Arch Capital Group |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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