Correlation Between CMS Energy and Icon Utilities

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

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

Diversification Opportunities for CMS Energy and Icon Utilities

0.65

Correlation Coefficient

CMS Energy  Icon Utilities

Poor diversification

The 3 months correlation between CMS and Icon is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Icon Utilities And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Utilities And 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 Icon Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Utilities And has no effect on the direction of CMS Energy i.e., CMS Energy and Icon Utilities go up and down completely randomly.

Pair Corralation between CMS Energy and Icon Utilities

Considering the 90-day investment horizon CMS Energy is expected to generate 1.24 times more return on investment than Icon Utilities. However, CMS Energy is 1.24 times more volatile than Icon Utilities And. It trades about 0.05 of its potential returns per unit of risk. Icon Utilities And is currently generating about 0.04 per unit of risk. If you would invest  5,801  in CMS Energy on August 31, 2024 and sell it today you would earn a total of  1,170  from holding CMS Energy or generate 20.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.73%
Values	Daily Returns

CMS Energy  vs.  Icon Utilities And

CMS Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CMS Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, CMS Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Icon Utilities And

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Utilities And are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Icon Utilities may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with CMS Energy and Icon Utilities

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

The idea behind CMS Energy and Icon Utilities And 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.