Correlation Between Nextera Energy and CMS Energy
Can any of the company-specific risk be diversified away by investing in both Nextera 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 Nextera 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 Nextera Energy and CMS Energy, you can compare the effects of market volatilities on Nextera 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 Nextera Energy with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and CMS Energy.
Diversification Opportunities for Nextera Energy and CMS Energy
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Nextera and CMS is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy and Nextera 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 Nextera 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 Nextera Energy i.e., Nextera Energy and CMS Energy go up and down completely randomly.
Pair Corralation between Nextera Energy and CMS Energy
Considering the 90-day investment horizon Nextera Energy is expected to under-perform the CMS Energy. In addition to that, Nextera Energy is 1.64 times more volatile than CMS Energy. It trades about -0.2 of its total potential returns per unit of risk. CMS Energy is currently generating about -0.12 per unit of volatility. If you would invest 7,155 in CMS Energy on August 24, 2024 and sell it today you would lose (234.00) from holding CMS Energy or give up 3.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextera Energy vs. CMS Energy
Performance |
| Timeline |
| Nextera Energy |
| CMS Energy |
Nextera Energy and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and CMS Energy
The main advantage of trading using opposite Nextera Energy and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera 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.| Nextera Energy vs. Vestis | Nextera Energy vs. China Aircraft Leasing | Nextera Energy vs. Awilco Drilling PLC | Nextera Energy vs. FTAI Aviation Ltd |
| 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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