Correlation Between Pacific Gas and CMS Energy
Can any of the company-specific risk be diversified away by investing in both Pacific Gas 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 Pacific Gas and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pacific Gas and and CMS Energy, you can compare the effects of market volatilities on Pacific Gas 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 Pacific Gas with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pacific Gas and CMS Energy.
Diversification Opportunities for Pacific Gas and CMS Energy
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pacific and CMS is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Pacific Gas and and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy and Pacific Gas 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 Pacific Gas and 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 Pacific Gas i.e., Pacific Gas and CMS Energy go up and down completely randomly.
Pair Corralation between Pacific Gas and CMS Energy
Assuming the 90 days trading horizon Pacific Gas is expected to generate 2.19 times less return on investment than CMS Energy. In addition to that, Pacific Gas is 2.63 times more volatile than CMS Energy. It trades about 0.0 of its total potential returns per unit of risk. CMS Energy is currently generating about 0.03 per unit of volatility. If you would invest 1,802 in CMS Energy on November 9, 2024 and sell it today you would earn a total of 9.00 from holding CMS Energy or generate 0.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 50.0% |
| Values | Daily Returns |
Pacific Gas and vs. CMS Energy
Performance |
| Timeline |
| Pacific Gas |
| CMS Energy |
Pacific Gas and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pacific Gas and CMS Energy
The main advantage of trading using opposite Pacific Gas and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pacific Gas 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.| Pacific Gas vs. Pacific Gas and | Pacific Gas vs. Pacific Gas and | Pacific Gas vs. Pacific Gas and | Pacific Gas vs. Pacific Gas and |
| 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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