Correlation Between CMS Energy and Constellation Energy

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

Diversification Opportunities for CMS Energy and Constellation Energy

0.71

Correlation Coefficient

CMS Energy  Constellation Energy

Poor diversification

The 3 months correlation between CMS and Constellation is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Constellation Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Constellation Energy Corp 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 Constellation Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Constellation Energy Corp has no effect on the direction of CMS Energy i.e., CMS Energy and Constellation Energy go up and down completely randomly.

Pair Corralation between CMS Energy and Constellation Energy

Assuming the 90 days trading horizon CMS Energy is expected to generate 0.16 times more return on investment than Constellation Energy. However, CMS Energy is 6.14 times less risky than Constellation Energy. It trades about -0.07 of its potential returns per unit of risk. Constellation Energy Corp is currently generating about -0.05 per unit of risk. If you would invest  1,776  in CMS Energy on February 3, 2025 and sell it today you would lose (59.00) from holding CMS Energy or give up 3.32% of portfolio value over 90 days.

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

CMS Energy  vs.  Constellation Energy Corp

CMS Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days CMS Energy 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 latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Constellation Energy Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Constellation Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in June 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with CMS Energy and Constellation Energy

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

The idea behind CMS Energy and Constellation Energy Corp 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.