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

0.9

Correlation Coefficient

CMS Energy  Mfs Utilities

Almost no diversification

The 3 months correlation between CMS and Mfs is 0.9. 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 1.76 times less return on investment than Mfs Utilities. In addition to that, CMS Energy is 1.06 times more volatile than Mfs Utilities Fund. It trades about 0.06 of its total potential returns per unit of risk. Mfs Utilities Fund is currently generating about 0.12 per unit of volatility. If you would invest  2,354  in Mfs Utilities Fund on August 31, 2024 and sell it today you would earn a total of  149.00  from holding Mfs Utilities Fund or generate 6.33% return on investment over 90 days.

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

CMS Energy  vs.  Mfs Utilities Fund

CMS Energy

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CMS Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. 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

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mfs Utilities Fund are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak forward indicators, Mfs Utilities may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.