Correlation Between CMS Energy and SPACE

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

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

Diversification Opportunities for CMS Energy and SPACE

-0.38

Correlation Coefficient

CMS Energy  SPACE

Very good diversification

The 3 months correlation between CMS and SPACE is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and SPACE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPACE and CMS 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 CMS Energy are associated (or correlated) with SPACE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPACE has no effect on the direction of CMS Energy i.e., CMS Energy and SPACE go up and down completely randomly.

Pair Corralation between CMS Energy and SPACE

Assuming the 90 days trading horizon CMS Energy is expected to under-perform the SPACE. But the preferred stock apears to be less risky and, when comparing its historical volatility, CMS Energy is 6.67 times less risky than SPACE. The preferred stock trades about -0.02 of its potential returns per unit of risk. The SPACE is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  35.00  in SPACE on September 12, 2024 and sell it today you would earn a total of  15.00  from holding SPACE or generate 42.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

CMS Energy  vs.  SPACE

CMS Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CMS Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CMS Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SPACE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPACE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SPACE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CMS Energy and SPACE

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

The idea behind CMS Energy and SPACE 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.