Correlation Between CMS Energy and First National

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

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

Diversification Opportunities for CMS Energy and First National

0.1

Correlation Coefficient

CMS Energy  First National

Average diversification

The 3 months correlation between CMS and First is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy Corp and First National Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Energy 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 Corp are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Energy has no effect on the direction of CMS Energy i.e., CMS Energy and First National go up and down completely randomly.

Pair Corralation between CMS Energy and First National

Given the investment horizon of 90 days CMS Energy Corp is expected to generate 0.04 times more return on investment than First National. However, CMS Energy Corp is 22.28 times less risky than First National. It trades about -0.01 of its potential returns per unit of risk. First National Energy is currently generating about -0.01 per unit of risk. If you would invest  2,202  in CMS Energy Corp on December 27, 2024 and sell it today you would lose (14.00) from holding CMS Energy Corp or give up 0.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

CMS Energy Corp  vs.  First National Energy

CMS Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days CMS Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CMS Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

First National Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days First National Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with CMS Energy and First National

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

The idea behind CMS Energy Corp and First National 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.