Correlation Between CMS Energy and GOLD ROAD
Can any of the company-specific risk be diversified away by investing in both CMS Energy and GOLD ROAD 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 GOLD ROAD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and GOLD ROAD RES, you can compare the effects of market volatilities on CMS Energy and GOLD ROAD 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 GOLD ROAD. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and GOLD ROAD.
Diversification Opportunities for CMS Energy and GOLD ROAD
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between CMS and GOLD is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and GOLD ROAD RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOLD ROAD RES 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 GOLD ROAD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOLD ROAD RES has no effect on the direction of CMS Energy i.e., CMS Energy and GOLD ROAD go up and down completely randomly.
Pair Corralation between CMS Energy and GOLD ROAD
Assuming the 90 days horizon CMS Energy is expected to generate 1.3 times less return on investment than GOLD ROAD. But when comparing it to its historical volatility, CMS Energy is 2.57 times less risky than GOLD ROAD. It trades about 0.08 of its potential returns per unit of risk. GOLD ROAD RES is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 105.00 in GOLD ROAD RES on September 14, 2024 and sell it today you would earn a total of 25.00 from holding GOLD ROAD RES or generate 23.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.64% |
| Values | Daily Returns |
CMS Energy vs. GOLD ROAD RES
Performance |
| Timeline |
| CMS Energy |
| GOLD ROAD RES |
CMS Energy and GOLD ROAD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and GOLD ROAD
The main advantage of trading using opposite CMS Energy and GOLD ROAD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, GOLD ROAD 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 GOLD ROAD will offset losses from the drop in GOLD ROAD's long position.| CMS Energy vs. Duke Energy | CMS Energy vs. WEC Energy Group | CMS Energy vs. ENDESA ADR 12 | CMS Energy vs. Terna Rete |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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