Correlation Between CMS Energy and Engie Brasil

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

By analyzing existing cross correlation between CMS Energy and Engie Brasil Energia, you can compare the effects of market volatilities on CMS Energy and Engie Brasil 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 Engie Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Engie Brasil.

Diversification Opportunities for CMS Energy and Engie Brasil

0.3

Correlation Coefficient

CMS Energy  Engie Brasil

Weak diversification

The 3 months correlation between CMS and Engie is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Engie Brasil Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie Brasil Energia 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 Engie Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie Brasil Energia has no effect on the direction of CMS Energy i.e., CMS Energy and Engie Brasil go up and down completely randomly.

Pair Corralation between CMS Energy and Engie Brasil

Considering the 90-day investment horizon CMS Energy is expected to generate 0.43 times more return on investment than Engie Brasil. However, CMS Energy is 2.35 times less risky than Engie Brasil. It trades about -0.1 of its potential returns per unit of risk. Engie Brasil Energia is currently generating about -0.1 per unit of risk. If you would invest  7,062  in CMS Energy on October 26, 2024 and sell it today you would lose (476.00) from holding CMS Energy or give up 6.74% of portfolio value over 90 days.

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

CMS Energy  vs.  Engie Brasil Energia

CMS Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CMS Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Engie Brasil Energia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engie Brasil Energia 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CMS Energy and Engie Brasil

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

The idea behind CMS Energy and Engie Brasil Energia 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.