Correlation Between CMS Energy and Central Puerto

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

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

Diversification Opportunities for CMS Energy and Central Puerto

0.01

Correlation Coefficient

CMS Energy  Central Puerto

Significant diversification

The 3 months correlation between CMS and Central is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Central Puerto SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Puerto SA 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 Central Puerto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Puerto SA has no effect on the direction of CMS Energy i.e., CMS Energy and Central Puerto go up and down completely randomly.

Pair Corralation between CMS Energy and Central Puerto

Considering the 90-day investment horizon CMS Energy is expected to generate 0.35 times more return on investment than Central Puerto. However, CMS Energy is 2.88 times less risky than Central Puerto. It trades about 0.07 of its potential returns per unit of risk. Central Puerto SA is currently generating about -0.01 per unit of risk. If you would invest  5,853  in CMS Energy on January 20, 2024 and sell it today you would earn a total of  102.00  from holding CMS Energy or generate 1.74% return on investment over 90 days.

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

CMS Energy  vs.  Central Puerto SA

CMS Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CMS Energy are ranked lower than 6 (%) 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 May 2024.

Central Puerto SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Puerto SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Puerto is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CMS Energy and Central Puerto

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

The idea behind CMS Energy and Central Puerto SA 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.