Correlation Between CenterPoint Energy and CMS Energy
Can any of the company-specific risk be diversified away by investing in both CenterPoint Energy and CMS 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 CenterPoint Energy and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CenterPoint Energy and CMS Energy, you can compare the effects of market volatilities on CenterPoint Energy and CMS 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 CenterPoint Energy with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and CMS Energy.
Diversification Opportunities for CenterPoint Energy and CMS Energy
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CenterPoint and CMS is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy and CenterPoint 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 CenterPoint Energy are associated (or correlated) with CMS Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMS Energy has no effect on the direction of CenterPoint Energy i.e., CenterPoint Energy and CMS Energy go up and down completely randomly.
Pair Corralation between CenterPoint Energy and CMS Energy
Considering the 90-day investment horizon CenterPoint Energy is expected to generate 1.36 times more return on investment than CMS Energy. However, CenterPoint Energy is 1.36 times more volatile than CMS Energy. It trades about 0.3 of its potential returns per unit of risk. CMS Energy is currently generating about -0.05 per unit of risk. If you would invest 3,215 in CenterPoint Energy on November 25, 2024 and sell it today you would earn a total of 214.00 from holding CenterPoint Energy or generate 6.66% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
CenterPoint Energy vs. CMS Energy
Performance |
Timeline |
CenterPoint Energy |
CMS Energy |
CenterPoint Energy and CMS Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CenterPoint Energy and CMS Energy
The main advantage of trading using opposite CenterPoint Energy and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CenterPoint Energy position performs unexpectedly, CMS 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 CMS Energy will offset losses from the drop in CMS Energy's long position.CenterPoint Energy vs. DTE Energy | ||
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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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