Correlation Between Solar Alliance and CMS Energy
Can any of the company-specific risk be diversified away by investing in both Solar Alliance 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 Solar Alliance and CMS Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solar Alliance Energy and CMS Energy, you can compare the effects of market volatilities on Solar Alliance 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 Solar Alliance with a short position of CMS Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solar Alliance and CMS Energy.
Diversification Opportunities for Solar Alliance and CMS Energy
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Solar and CMS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Solar Alliance Energy and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy and Solar Alliance 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 Solar Alliance 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 Solar Alliance i.e., Solar Alliance and CMS Energy go up and down completely randomly.
Pair Corralation between Solar Alliance and CMS Energy
Assuming the 90 days horizon Solar Alliance Energy is expected to under-perform the CMS Energy. In addition to that, Solar Alliance is 5.99 times more volatile than CMS Energy. It trades about -0.14 of its total potential returns per unit of risk. CMS Energy is currently generating about 0.13 per unit of volatility. If you would invest 6,787 in CMS Energy on September 3, 2024 and sell it today you would earn a total of 184.00 from holding CMS Energy or generate 2.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solar Alliance Energy vs. CMS Energy
Performance |
| Timeline |
| Solar Alliance Energy |
| CMS Energy |
Solar Alliance and CMS Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solar Alliance and CMS Energy
The main advantage of trading using opposite Solar Alliance and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solar Alliance 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.| Solar Alliance vs. Aurora Solar Technologies | Solar Alliance vs. Cryptoblox Technologies | Solar Alliance vs. Sun Pacific Holding | Solar Alliance vs. Solar Integrated Roofing |
| 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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