Correlation Between CMS Energy and Utilities Fund

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

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

Diversification Opportunities for CMS Energy and Utilities Fund

0.7

Correlation Coefficient

CMS Energy  Utilities Fund

Poor diversification

The 3 months correlation between CMS and UTILITIES is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Utilities Fund Investor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Fund Investor 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 Utilities Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Fund Investor has no effect on the direction of CMS Energy i.e., CMS Energy and Utilities Fund go up and down completely randomly.

Pair Corralation between CMS Energy and Utilities Fund

Considering the 90-day investment horizon CMS Energy is expected to generate 1.11 times more return on investment than Utilities Fund. However, CMS Energy is 1.11 times more volatile than Utilities Fund Investor. It trades about 0.17 of its potential returns per unit of risk. Utilities Fund Investor is currently generating about 0.08 per unit of risk. If you would invest  6,615  in CMS Energy on December 21, 2024 and sell it today you would earn a total of  735.00  from holding CMS Energy or generate 11.11% return on investment over 90 days.

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

CMS Energy  vs.  Utilities Fund Investor

CMS Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CMS Energy are ranked lower than 13 (%) 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.

Utilities Fund Investor

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Fund Investor are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong forward indicators, Utilities Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CMS Energy and Utilities Fund

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

The idea behind CMS Energy and Utilities Fund Investor 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 Valuation module to check real value of public entities based on technical and fundamental data.