Correlation Between Aegon Funding and CMS Energy

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

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

Diversification Opportunities for Aegon Funding and CMS Energy

0.71

Correlation Coefficient

Aegon Funding  CMS Energy

Poor diversification

The 3 months correlation between Aegon and CMS is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Aegon Funding 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 Aegon Funding 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 Aegon Funding 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 Aegon Funding i.e., Aegon Funding and CMS Energy go up and down completely randomly.

Pair Corralation between Aegon Funding and CMS Energy

Given the investment horizon of 90 days Aegon Funding is expected to under-perform the CMS Energy. In addition to that, Aegon Funding is 1.42 times more volatile than CMS Energy Corp. It trades about -0.04 of its total potential returns per unit of risk. CMS Energy Corp is currently generating about -0.03 per unit of volatility. If you would invest  2,296  in CMS Energy Corp on December 27, 2024 and sell it today you would lose (30.00) from holding CMS Energy Corp or give up 1.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Aegon Funding  vs.  CMS Energy Corp

Aegon Funding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aegon Funding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aegon Funding is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Aegon Funding and CMS Energy

The main advantage of trading using opposite Aegon Funding and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aegon Funding 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 Aegon Funding 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.