Correlation Between United States and CMS Energy

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

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

Diversification Opportunities for United States and CMS Energy

0.04

Correlation Coefficient

United States  CMS Energy

Significant diversification

The 3 months correlation between United and CMS is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding United States Cellular and CMS Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy Corp and United States 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 United States Cellular are associated (or correlated) with CMS Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMS Energy Corp has no effect on the direction of United States i.e., United States and CMS Energy go up and down completely randomly.

Pair Corralation between United States and CMS Energy

Considering the 90-day investment horizon United States Cellular is expected to generate 1.61 times more return on investment than CMS Energy. However, United States is 1.61 times more volatile than CMS Energy Corp. It trades about 0.17 of its potential returns per unit of risk. CMS Energy Corp is currently generating about -0.03 per unit of risk. If you would invest  2,259  in United States Cellular on August 31, 2024 and sell it today you would earn a total of  54.00  from holding United States Cellular or generate 2.39% return on investment over 90 days.

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

United States Cellular  vs.  CMS Energy Corp

United States Cellular

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United States Cellular are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, United States may actually be approaching a critical reversion point that can send shares even higher in December 2024.

CMS Energy Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CMS Energy Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with United States and CMS Energy

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

The idea behind United States Cellular and CMS Energy Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.