Correlation Between PGE Corp and CMS Energy
Can any of the company-specific risk be diversified away by investing in both PGE Corp 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 PGE Corp and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PGE Corp and CMS Energy, you can compare the effects of market volatilities on PGE Corp 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 PGE Corp with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGE Corp and CMS Energy.
Diversification Opportunities for PGE Corp and CMS Energy
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PGE and CMS is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy and PGE Corp 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 PGE Corp 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 PGE Corp i.e., PGE Corp and CMS Energy go up and down completely randomly.
Pair Corralation between PGE Corp and CMS Energy
Considering the 90-day investment horizon PGE Corp is expected to generate 1.91 times less return on investment than CMS Energy. In addition to that, PGE Corp is 1.11 times more volatile than CMS Energy. It trades about 0.01 of its total potential returns per unit of risk. CMS Energy is currently generating about 0.02 per unit of volatility. If you would invest 1,673 in CMS Energy on November 9, 2024 and sell it today you would earn a total of 138.00 from holding CMS Energy or generate 8.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PGE Corp vs. CMS Energy
Performance |
| Timeline |
| PGE Corp |
| CMS Energy |
PGE Corp and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PGE Corp and CMS Energy
The main advantage of trading using opposite PGE Corp and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PGE Corp 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.| PGE Corp vs. Consolidated Edison | PGE Corp vs. Southern Company | PGE Corp vs. Entergy | PGE Corp vs. Pinnacle West Capital |
| 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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