Correlation Between CMS Energy and WEC Energy
Can any of the company-specific risk be diversified away by investing in both CMS Energy and WEC 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 CMS Energy and WEC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and WEC Energy Group, you can compare the effects of market volatilities on CMS Energy and WEC 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 CMS Energy with a short position of WEC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and WEC Energy.
Diversification Opportunities for CMS Energy and WEC Energy
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CMS and WEC is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy Group 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 WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of CMS Energy i.e., CMS Energy and WEC Energy go up and down completely randomly.
Pair Corralation between CMS Energy and WEC Energy
Assuming the 90 days horizon CMS Energy is expected to generate 1.51 times less return on investment than WEC Energy. In addition to that, CMS Energy is 1.11 times more volatile than WEC Energy Group. It trades about 0.11 of its total potential returns per unit of risk. WEC Energy Group is currently generating about 0.18 per unit of volatility. If you would invest 7,143 in WEC Energy Group on September 12, 2024 and sell it today you would earn a total of 1,997 from holding WEC Energy Group or generate 27.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMS Energy vs. WEC Energy Group
Performance |
| Timeline |
| CMS Energy |
| WEC Energy Group |
CMS Energy and WEC Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and WEC Energy
The main advantage of trading using opposite CMS Energy and WEC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, WEC 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 WEC Energy will offset losses from the drop in WEC Energy'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 |
| WEC Energy vs. Nippon Steel | WEC Energy vs. ALGOMA STEEL GROUP | WEC Energy vs. ITALIAN WINE BRANDS | WEC Energy vs. RELIANCE STEEL AL |
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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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