Correlation Between STRATS SM and CMS Energy
Can any of the company-specific risk be diversified away by investing in both STRATS SM 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 STRATS SM and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between STRATS SM Trust and CMS Energy Corp, you can compare the effects of market volatilities on STRATS SM 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 STRATS SM with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of STRATS SM and CMS Energy.
Diversification Opportunities for STRATS SM and CMS Energy
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between STRATS and CMS is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding STRATS SM Trust and CMS Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy Corp and STRATS SM 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 STRATS SM Trust 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 Corp has no effect on the direction of STRATS SM i.e., STRATS SM and CMS Energy go up and down completely randomly.
Pair Corralation between STRATS SM and CMS Energy
Considering the 90-day investment horizon STRATS SM Trust is expected to under-perform the CMS Energy. But the stock apears to be less risky and, when comparing its historical volatility, STRATS SM Trust is 1.06 times less risky than CMS Energy. The stock trades about -0.06 of its potential returns per unit of risk. The CMS Energy Corp is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 2,444 in CMS Energy Corp on September 2, 2024 and sell it today you would lose (12.00) from holding CMS Energy Corp or give up 0.49% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
STRATS SM Trust vs. CMS Energy Corp
Performance |
| Timeline |
| STRATS SM Trust |
| CMS Energy Corp |
STRATS SM and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with STRATS SM and CMS Energy
The main advantage of trading using opposite STRATS SM and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STRATS SM 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.| STRATS SM vs. CMS Energy Corp | STRATS SM vs. Southern Co | STRATS SM vs. Duke Energy Corp | STRATS SM vs. Southern Co |
| CMS Energy vs. CMS Energy Corp | CMS Energy vs. DTE Energy Co | CMS Energy vs. Duke Energy Corp | CMS Energy vs. Southern Co |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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