Correlation Between Consumers Energy and Atmos Energy

Can any of the company-specific risk be diversified away by investing in both Consumers Energy and Atmos 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 Consumers Energy and Atmos Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Consumers Energy and Atmos Energy, you can compare the effects of market volatilities on Consumers Energy and Atmos 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 Consumers Energy with a short position of Atmos Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumers Energy and Atmos Energy.

Diversification Opportunities for Consumers Energy and Atmos Energy

-0.35

Correlation Coefficient

Consumers Energy  Atmos Energy

Very good diversification

The 3 months correlation between Consumers and Atmos is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy and Atmos Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atmos Energy and Consumers 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 Consumers Energy are associated (or correlated) with Atmos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atmos Energy has no effect on the direction of Consumers Energy i.e., Consumers Energy and Atmos Energy go up and down completely randomly.

Pair Corralation between Consumers Energy and Atmos Energy

Assuming the 90 days trading horizon Consumers Energy is expected to generate 15.88 times less return on investment than Atmos Energy. In addition to that, Consumers Energy is 1.5 times more volatile than Atmos Energy. It trades about 0.01 of its total potential returns per unit of risk. Atmos Energy is currently generating about 0.17 per unit of volatility. If you would invest  11,526  in Atmos Energy on September 26, 2024 and sell it today you would earn a total of  2,480  from holding Atmos Energy or generate 21.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Consumers Energy  vs.  Atmos Energy

Consumers Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consumers Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Atmos Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Atmos Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Atmos Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Consumers Energy and Atmos Energy

The main advantage of trading using opposite Consumers Energy and Atmos Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumers Energy position performs unexpectedly, Atmos 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 Atmos Energy will offset losses from the drop in Atmos Energy's long position.

The idea behind Consumers Energy and Atmos Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.