Correlation Between Hercules Capital and CMS Energy
Can any of the company-specific risk be diversified away by investing in both Hercules Capital 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 Hercules Capital and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hercules Capital and CMS Energy Corp, you can compare the effects of market volatilities on Hercules Capital 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 Hercules Capital with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hercules Capital and CMS Energy.
Diversification Opportunities for Hercules Capital and CMS Energy
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hercules and CMS is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Hercules Capital 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 Hercules Capital 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 Hercules Capital 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 Hercules Capital i.e., Hercules Capital and CMS Energy go up and down completely randomly.
Pair Corralation between Hercules Capital and CMS Energy
Given the investment horizon of 90 days Hercules Capital is expected to generate 0.99 times more return on investment than CMS Energy. However, Hercules Capital is 1.01 times less risky than CMS Energy. It trades about 0.0 of its potential returns per unit of risk. CMS Energy Corp is currently generating about -0.08 per unit of risk. If you would invest 2,515 in Hercules Capital on September 12, 2024 and sell it today you would lose (2.53) from holding Hercules Capital or give up 0.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hercules Capital vs. CMS Energy Corp
Performance |
| Timeline |
| Hercules Capital |
| CMS Energy Corp |
Hercules Capital and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hercules Capital and CMS Energy
The main advantage of trading using opposite Hercules Capital and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hercules Capital 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.| Hercules Capital vs. Eagle Point Credit | Hercules Capital vs. CMS Energy Corp | Hercules Capital vs. Georgia Power Co | Hercules Capital vs. Argo Group 65 |
| CMS Energy vs. CMS Energy Corp | CMS Energy vs. CMS Energy Corp | CMS Energy vs. Duke Energy Corp | CMS Energy vs. American Financial Group |
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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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