Correlation Between CMS Energy and Aegon Funding

Can any of the company-specific risk be diversified away by investing in both CMS Energy and Aegon Funding 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 Aegon Funding 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 Aegon Funding, you can compare the effects of market volatilities on CMS Energy and Aegon Funding 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 Aegon Funding. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Aegon Funding.

Diversification Opportunities for CMS Energy and Aegon Funding

0.66

Correlation Coefficient

CMS Energy  Aegon Funding

Poor diversification

The 3 months correlation between CMS and Aegon is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy Corp and Aegon Funding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon Funding 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 Aegon Funding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon Funding has no effect on the direction of CMS Energy i.e., CMS Energy and Aegon Funding go up and down completely randomly.

Pair Corralation between CMS Energy and Aegon Funding

Given the investment horizon of 90 days CMS Energy is expected to generate 6.3 times less return on investment than Aegon Funding. But when comparing it to its historical volatility, CMS Energy Corp is 1.87 times less risky than Aegon Funding. It trades about 0.0 of its potential returns per unit of risk. Aegon Funding is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,175  in Aegon Funding on September 2, 2024 and sell it today you would earn a total of  4.00  from holding Aegon Funding or generate 0.18% return on investment over 90 days.

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

CMS Energy Corp  vs.  Aegon Funding

CMS Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CMS Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CMS Energy is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Aegon Funding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegon Funding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aegon Funding is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CMS Energy and Aegon Funding

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

The idea behind CMS Energy Corp and Aegon Funding 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.