Correlation Between CMS Energy and Public Service

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

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

Diversification Opportunities for CMS Energy and Public Service

-0.54

Correlation Coefficient

CMS Energy  Public Service

Excellent diversification

The 3 months correlation between CMS and Public is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Public Service Enterprise in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Public Service Enterprise 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 Public Service. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Public Service Enterprise has no effect on the direction of CMS Energy i.e., CMS Energy and Public Service go up and down completely randomly.

Pair Corralation between CMS Energy and Public Service

Considering the 90-day investment horizon CMS Energy is expected to generate 0.77 times more return on investment than Public Service. However, CMS Energy is 1.3 times less risky than Public Service. It trades about 0.15 of its potential returns per unit of risk. Public Service Enterprise is currently generating about -0.03 per unit of risk. If you would invest  6,643  in CMS Energy on December 26, 2024 and sell it today you would earn a total of  687.00  from holding CMS Energy or generate 10.34% return on investment over 90 days.

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

CMS Energy  vs.  Public Service Enterprise

CMS Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CMS Energy are ranked lower than 11 (%) 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.

Public Service Enterprise

Risk-Adjusted Performance

Very Weak

Over the last 90 days Public Service Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Public Service is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CMS Energy and Public Service

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

The idea behind CMS Energy and Public Service Enterprise 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.