Correlation Between Advent Technologies and CMS Energy

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

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

Diversification Opportunities for Advent Technologies and CMS Energy

0.15

Correlation Coefficient

Advent Technologies  CMS Energy

Average diversification

The 3 months correlation between Advent and CMS is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Advent Technologies Holdings 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 Advent Technologies 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 Advent Technologies Holdings 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 Advent Technologies i.e., Advent Technologies and CMS Energy go up and down completely randomly.

Pair Corralation between Advent Technologies and CMS Energy

Considering the 90-day investment horizon Advent Technologies Holdings is expected to generate 9.05 times more return on investment than CMS Energy. However, Advent Technologies is 9.05 times more volatile than CMS Energy Corp. It trades about 0.04 of its potential returns per unit of risk. CMS Energy Corp is currently generating about -0.05 per unit of risk. If you would invest  480.00  in Advent Technologies Holdings on December 1, 2024 and sell it today you would earn a total of  24.00  from holding Advent Technologies Holdings or generate 5.0% return on investment over 90 days.

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

Advent Technologies Holdings  vs.  CMS Energy Corp

Advent Technologies

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Advent Technologies Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Advent Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

CMS Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days CMS Energy Corp 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.

Pair Trading with Advent Technologies and CMS Energy

The main advantage of trading using opposite Advent Technologies and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Advent Technologies 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 Advent Technologies Holdings 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.