Correlation Between Emera Incorporated and CMS Energy
Can any of the company-specific risk be diversified away by investing in both Emera Incorporated 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 Emera Incorporated and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Emera Incorporated and CMS Energy, you can compare the effects of market volatilities on Emera Incorporated 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 Emera Incorporated with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Emera Incorporated and CMS Energy.
Diversification Opportunities for Emera Incorporated and CMS Energy
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Emera and CMS is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Emera Incorporated and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy and Emera Incorporated 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 Emera Incorporated 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 Emera Incorporated i.e., Emera Incorporated and CMS Energy go up and down completely randomly.
Pair Corralation between Emera Incorporated and CMS Energy
Assuming the 90 days horizon Emera Incorporated is expected to generate 1.21 times more return on investment than CMS Energy. However, Emera Incorporated is 1.21 times more volatile than CMS Energy. It trades about 0.08 of its potential returns per unit of risk. CMS Energy is currently generating about 0.04 per unit of risk. If you would invest 3,728 in Emera Incorporated on September 1, 2024 and sell it today you would earn a total of 84.00 from holding Emera Incorporated or generate 2.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Emera Incorporated vs. CMS Energy
Performance |
| Timeline |
| Emera Incorporated |
| CMS Energy |
Emera Incorporated and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Emera Incorporated and CMS Energy
The main advantage of trading using opposite Emera Incorporated and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emera Incorporated 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.| Emera Incorporated vs. CMS Energy | Emera Incorporated vs. Ameren Corp | Emera Incorporated vs. Pinnacle West Capital | Emera Incorporated vs. MGE Energy |
| 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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