Correlation Between Exelon and CMS Energy
Can any of the company-specific risk be diversified away by investing in both Exelon 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 Exelon and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exelon and CMS Energy, you can compare the effects of market volatilities on Exelon 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 Exelon with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exelon and CMS Energy.
Diversification Opportunities for Exelon and CMS Energy
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Exelon and CMS is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Exelon and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy and Exelon 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 Exelon 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 Exelon i.e., Exelon and CMS Energy go up and down completely randomly.
Pair Corralation between Exelon and CMS Energy
Considering the 90-day investment horizon Exelon is expected to generate 1.18 times more return on investment than CMS Energy. However, Exelon is 1.18 times more volatile than CMS Energy. It trades about 0.27 of its potential returns per unit of risk. CMS Energy is currently generating about 0.19 per unit of risk. If you would invest 3,719 in Exelon on October 20, 2024 and sell it today you would earn a total of 223.00 from holding Exelon or generate 6.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exelon vs. CMS Energy
Performance |
| Timeline |
| Exelon |
| CMS Energy |
Exelon and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exelon and CMS Energy
The main advantage of trading using opposite Exelon and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exelon 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.| Exelon vs. Duke Energy | Exelon vs. Dominion Energy | Exelon vs. Southern Company | Exelon vs. Consolidated Edison |
| 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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