Correlation Between Microsoft and CMS Energy
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and CMS Energy Corp, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and CMS Energy.
Diversification Opportunities for Microsoft and CMS Energy
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Microsoft and CMS is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and CMS Energy go up and down completely randomly.
Pair Corralation between Microsoft and CMS Energy
Given the investment horizon of 90 days Microsoft is expected to under-perform the CMS Energy. In addition to that, Microsoft is 3.46 times more volatile than CMS Energy Corp. It trades about -0.03 of its total potential returns per unit of risk. CMS Energy Corp is currently generating about 0.02 per unit of volatility. If you would invest 2,439 in CMS Energy Corp on August 24, 2024 and sell it today you would earn a total of 6.00 from holding CMS Energy Corp or generate 0.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. CMS Energy Corp
Performance |
| Timeline |
| Microsoft |
| CMS Energy Corp |
Microsoft and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and CMS Energy
The main advantage of trading using opposite Microsoft and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Other Complementary Tools
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules |