Correlation Between CMS Energy and Mfs Utilities

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

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

Diversification Opportunities for CMS Energy and Mfs Utilities

0.86

Correlation Coefficient

CMS Energy  Mfs Utilities

Very poor diversification

The 3 months correlation between CMS and Mfs is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Mfs Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mfs Utilities 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 Mfs Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mfs Utilities has no effect on the direction of CMS Energy i.e., CMS Energy and Mfs Utilities go up and down completely randomly.

Pair Corralation between CMS Energy and Mfs Utilities

Considering the 90-day investment horizon CMS Energy is expected to generate 0.99 times more return on investment than Mfs Utilities. However, CMS Energy is 1.01 times less risky than Mfs Utilities. It trades about -0.05 of its potential returns per unit of risk. Mfs Utilities Fund is currently generating about -0.1 per unit of risk. If you would invest  6,973  in CMS Energy on September 17, 2024 and sell it today you would lose (241.00) from holding CMS Energy or give up 3.46% of portfolio value over 90 days.

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

CMS Energy  vs.  Mfs Utilities Fund

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 comparatively stable primary indicators, CMS Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Mfs Utilities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mfs Utilities Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Mfs Utilities is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CMS Energy and Mfs Utilities

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

The idea behind CMS Energy and Mfs Utilities Fund 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.