Correlation Between Talen Energy and Consumers Energy

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

By analyzing existing cross correlation between Talen Energy and Consumers Energy, you can compare the effects of market volatilities on Talen Energy and Consumers 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 Talen Energy with a short position of Consumers Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Talen Energy and Consumers Energy.

Diversification Opportunities for Talen Energy and Consumers Energy

0.67

Correlation Coefficient

Talen Energy  Consumers Energy

Poor diversification

The 3 months correlation between Talen and Consumers is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Talen Energy and Consumers Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumers Energy and Talen 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 Talen Energy are associated (or correlated) with Consumers Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumers Energy has no effect on the direction of Talen Energy i.e., Talen Energy and Consumers Energy go up and down completely randomly.

Pair Corralation between Talen Energy and Consumers Energy

Considering the 90-day investment horizon Talen Energy is expected to generate 4.89 times more return on investment than Consumers Energy. However, Talen Energy is 4.89 times more volatile than Consumers Energy. It trades about 0.25 of its potential returns per unit of risk. Consumers Energy is currently generating about 0.09 per unit of risk. If you would invest  28,510  in Talen Energy on May 5, 2025 and sell it today you would earn a total of  9,291  from holding Talen Energy or generate 32.59% return on investment over 90 days.

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

Talen Energy  vs.  Consumers Energy

Talen Energy

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Talen Energy are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Talen Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Consumers Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Consumers Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Consumers Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Talen Energy and Consumers Energy

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

The idea behind Talen Energy and Consumers 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.

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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 Commodity Directory module to find actively traded commodities issued by global exchanges.