Correlation Between CMS Energy and INNOVATEC SPA
Can any of the company-specific risk be diversified away by investing in both CMS Energy and INNOVATEC SPA 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 INNOVATEC SPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and INNOVATEC SPA, you can compare the effects of market volatilities on CMS Energy and INNOVATEC SPA 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 INNOVATEC SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and INNOVATEC SPA.
Diversification Opportunities for CMS Energy and INNOVATEC SPA
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between CMS and INNOVATEC is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and INNOVATEC SPA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INNOVATEC SPA 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 are associated (or correlated) with INNOVATEC SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INNOVATEC SPA has no effect on the direction of CMS Energy i.e., CMS Energy and INNOVATEC SPA go up and down completely randomly.
Pair Corralation between CMS Energy and INNOVATEC SPA
Assuming the 90 days horizon CMS Energy is expected to generate 3.4 times less return on investment than INNOVATEC SPA. But when comparing it to its historical volatility, CMS Energy is 4.97 times less risky than INNOVATEC SPA. It trades about 0.11 of its potential returns per unit of risk. INNOVATEC SPA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 81.00 in INNOVATEC SPA on September 12, 2024 and sell it today you would earn a total of 5.00 from holding INNOVATEC SPA or generate 6.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
CMS Energy vs. INNOVATEC SPA
Performance |
Timeline |
CMS Energy |
INNOVATEC SPA |
CMS Energy and INNOVATEC SPA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CMS Energy and INNOVATEC SPA
The main advantage of trading using opposite CMS Energy and INNOVATEC SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, INNOVATEC SPA 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 INNOVATEC SPA will offset losses from the drop in INNOVATEC SPA's long position.CMS Energy vs. INTERCONT HOTELS | CMS Energy vs. Dalata Hotel Group | CMS Energy vs. VITEC SOFTWARE GROUP | CMS Energy vs. Constellation Software |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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