Correlation Between Central Puerto and CMS Energy

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

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

Diversification Opportunities for Central Puerto and CMS Energy

-0.89

Correlation Coefficient

Central Puerto  CMS Energy

Pay attention - limited upside

The 3 months correlation between Central and CMS is -0.89. Overlapping area represents the amount of risk that can be diversified away by holding Central Puerto SA and CMS Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMS Energy and Central Puerto 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 Central Puerto SA 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 has no effect on the direction of Central Puerto i.e., Central Puerto and CMS Energy go up and down completely randomly.

Pair Corralation between Central Puerto and CMS Energy

Given the investment horizon of 90 days Central Puerto SA is expected to under-perform the CMS Energy. In addition to that, Central Puerto is 2.86 times more volatile than CMS Energy. It trades about -0.09 of its total potential returns per unit of risk. CMS Energy is currently generating about 0.15 per unit of volatility. If you would invest  6,611  in CMS Energy on December 28, 2024 and sell it today you would earn a total of  704.00  from holding CMS Energy or generate 10.65% return on investment over 90 days.

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

Central Puerto SA  vs.  CMS Energy

Central Puerto SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Central Puerto SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

CMS Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CMS Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, CMS Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Central Puerto and CMS Energy

The main advantage of trading using opposite Central Puerto and CMS Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Puerto 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 Central Puerto SA and CMS Energy 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.