Correlation Between CMS Energy and National Rural
Can any of the company-specific risk be diversified away by investing in both CMS Energy and National Rural 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 National Rural 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 National Rural Utilities, you can compare the effects of market volatilities on CMS Energy and National Rural 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 National Rural. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and National Rural.
Diversification Opportunities for CMS Energy and National Rural
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CMS and National is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy Corp and National Rural Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Rural Utilities 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 National Rural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Rural Utilities has no effect on the direction of CMS Energy i.e., CMS Energy and National Rural go up and down completely randomly.
Pair Corralation between CMS Energy and National Rural
Given the investment horizon of 90 days CMS Energy Corp is expected to generate 0.82 times more return on investment than National Rural. However, CMS Energy Corp is 1.22 times less risky than National Rural. It trades about 0.05 of its potential returns per unit of risk. National Rural Utilities is currently generating about 0.03 per unit of risk. If you would invest 2,218 in CMS Energy Corp on August 28, 2024 and sell it today you would earn a total of 240.00 from holding CMS Energy Corp or generate 10.82% 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. National Rural Utilities
Performance |
| Timeline |
| CMS Energy Corp |
| National Rural Utilities |
CMS Energy and National Rural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and National Rural
The main advantage of trading using opposite CMS Energy and National Rural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, National Rural 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 National Rural will offset losses from the drop in National Rural's long position.| CMS Energy vs. CMS Energy Corp | CMS Energy vs. DTE Energy Co | CMS Energy vs. Duke Energy Corp | CMS Energy vs. Southern Co |
| National Rural vs. CMS Energy Corp | National Rural vs. Southern Co | National Rural vs. Duke Energy Corp | National Rural vs. Southern Co |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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