Correlation Between Genie Energy and CMS Energy
Can any of the company-specific risk be diversified away by investing in both Genie Energy 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 Genie Energy and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Genie Energy and CMS Energy, you can compare the effects of market volatilities on Genie Energy 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 Genie Energy with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genie Energy and CMS Energy.
Diversification Opportunities for Genie Energy and CMS Energy
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Genie and CMS is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Genie Energy and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy and Genie 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 Genie Energy 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 Genie Energy i.e., Genie Energy and CMS Energy go up and down completely randomly.
Pair Corralation between Genie Energy and CMS Energy
Considering the 90-day investment horizon Genie Energy is expected to generate 2.03 times more return on investment than CMS Energy. However, Genie Energy is 2.03 times more volatile than CMS Energy. It trades about 0.05 of its potential returns per unit of risk. CMS Energy is currently generating about 0.02 per unit of risk. If you would invest 868.00 in Genie Energy on November 1, 2024 and sell it today you would earn a total of 566.00 from holding Genie Energy or generate 65.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Genie Energy vs. CMS Energy
Performance |
| Timeline |
| Genie Energy |
| CMS Energy |
Genie Energy and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Genie Energy and CMS Energy
The main advantage of trading using opposite Genie Energy and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genie Energy 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.| Genie Energy vs. Centrais Electricas Brasileiras | Genie Energy vs. Central Puerto SA | Genie Energy vs. Korea Electric Power | Genie Energy vs. Empresa Distribuidora y |
| CMS Energy vs. Entergy Texas | CMS Energy vs. Duke Energy | CMS Energy vs. Spire Inc | CMS Energy vs. Consumers Energy |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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