Correlation Between CMS Energy and Commonwealth Bank

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

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

Diversification Opportunities for CMS Energy and Commonwealth Bank

-0.76

Correlation Coefficient

CMS Energy  Commonwealth Bank

Pay attention - limited upside

The 3 months correlation between CMS and Commonwealth is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Commonwealth Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commonwealth Bank 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 Commonwealth Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commonwealth Bank has no effect on the direction of CMS Energy i.e., CMS Energy and Commonwealth Bank go up and down completely randomly.

Pair Corralation between CMS Energy and Commonwealth Bank

Assuming the 90 days trading horizon CMS Energy is expected to generate 0.48 times more return on investment than Commonwealth Bank. However, CMS Energy is 2.07 times less risky than Commonwealth Bank. It trades about 0.35 of its potential returns per unit of risk. Commonwealth Bank of is currently generating about -0.11 per unit of risk. If you would invest  1,690  in CMS Energy on June 29, 2025 and sell it today you would earn a total of  247.00  from holding CMS Energy or generate 14.62% return on investment over 90 days.

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

CMS Energy  vs.  Commonwealth Bank of

CMS Energy

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CMS Energy are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, CMS Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Commonwealth Bank

Risk-Adjusted Performance

Weakest

Over the last 90 days Commonwealth Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with CMS Energy and Commonwealth Bank

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

The idea behind CMS Energy and Commonwealth Bank of 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.