Correlation Between CMS Energy and Excelerate Energy

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Can any of the company-specific risk be diversified away by investing in both CMS Energy and Excelerate Energy 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 Excelerate Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and Excelerate Energy, you can compare the effects of market volatilities on CMS Energy and Excelerate Energy 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 Excelerate Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Excelerate Energy.

Diversification Opportunities for CMS Energy and Excelerate Energy

0.44
  Correlation Coefficient

Very weak diversification

The 3 months correlation between CMS and Excelerate is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Excelerate Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excelerate 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 are associated (or correlated) with Excelerate Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excelerate Energy has no effect on the direction of CMS Energy i.e., CMS Energy and Excelerate Energy go up and down completely randomly.

Pair Corralation between CMS Energy and Excelerate Energy

Considering the 90-day investment horizon CMS Energy is expected to generate 0.44 times more return on investment than Excelerate Energy. However, CMS Energy is 2.3 times less risky than Excelerate Energy. It trades about -0.01 of its potential returns per unit of risk. Excelerate Energy is currently generating about -0.02 per unit of risk. If you would invest  6,777  in CMS Energy on December 30, 2023 and sell it today you would lose (743.00) from holding CMS Energy or give up 10.96% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.6%
ValuesDaily Returns

CMS Energy  vs.  Excelerate Energy

 Performance 
       Timeline  
CMS Energy 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in CMS Energy are ranked lower than 3 (%) 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 recent stock price uproar, may contribute to short-horizon losses for the private investors.
Excelerate Energy 

Risk-Adjusted Performance

3 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Excelerate Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Excelerate Energy may actually be approaching a critical reversion point that can send shares even higher in April 2024.

CMS Energy and Excelerate Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CMS Energy and Excelerate Energy

The main advantage of trading using opposite CMS Energy and Excelerate Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Excelerate Energy 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 Excelerate Energy will offset losses from the drop in Excelerate Energy's long position.
The idea behind CMS Energy and Excelerate 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.
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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