Correlation Between CMS Energy and Spire

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

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

Diversification Opportunities for CMS Energy and Spire

-0.39

Correlation Coefficient

CMS Energy  Spire

Very good diversification

The 3 months correlation between CMS and Spire is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Spire Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Inc 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 Spire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Inc has no effect on the direction of CMS Energy i.e., CMS Energy and Spire go up and down completely randomly.

Pair Corralation between CMS Energy and Spire

Assuming the 90 days trading horizon CMS Energy is expected to under-perform the Spire. But the preferred stock apears to be less risky and, when comparing its historical volatility, CMS Energy is 1.83 times less risky than Spire. The preferred stock trades about -0.12 of its potential returns per unit of risk. The Spire Inc is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,639  in Spire Inc on September 27, 2024 and sell it today you would earn a total of  72.00  from holding Spire Inc or generate 1.08% return on investment over 90 days.

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

CMS Energy  vs.  Spire Inc

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 latest weak performance, the Preferred Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Spire Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Spire Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Spire is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CMS Energy and Spire

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

The idea behind CMS Energy and Spire Inc 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 Transaction History module to view history of all your transactions and understand their impact on performance.