Correlation Between Connecticut Light and CMS Energy
Can any of the company-specific risk be diversified away by investing in both Connecticut Light 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 Connecticut Light and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Connecticut Light and CMS Energy, you can compare the effects of market volatilities on Connecticut Light 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 Connecticut Light with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Connecticut Light and CMS Energy.
Diversification Opportunities for Connecticut Light and CMS Energy
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Connecticut and CMS is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding The Connecticut Light and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy and Connecticut Light 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 The Connecticut Light 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 Connecticut Light i.e., Connecticut Light and CMS Energy go up and down completely randomly.
Pair Corralation between Connecticut Light and CMS Energy
Assuming the 90 days horizon The Connecticut Light is expected to under-perform the CMS Energy. In addition to that, Connecticut Light is 3.07 times more volatile than CMS Energy. It trades about -0.06 of its total potential returns per unit of risk. CMS Energy is currently generating about -0.12 per unit of volatility. If you would invest 6,766 in CMS Energy on October 11, 2024 and sell it today you would lose (136.00) from holding CMS Energy or give up 2.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
The Connecticut Light vs. CMS Energy
Performance |
| Timeline |
| Connecticut Light |
| CMS Energy |
Connecticut Light and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Connecticut Light and CMS Energy
The main advantage of trading using opposite Connecticut Light and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Connecticut Light 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.| Connecticut Light vs. NH Foods Ltd | Connecticut Light vs. ServiceNow | Connecticut Light vs. Cadence Design Systems | Connecticut Light vs. Rackspace Technology |
| CMS Energy vs. Entergy | CMS Energy vs. Ameren Corp | CMS Energy vs. CenterPoint Energy | CMS Energy vs. Alliant Energy Corp |
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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