Correlation Between CEZ A and Xcel Energy
Can any of the company-specific risk be diversified away by investing in both CEZ A and Xcel 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 CEZ A and Xcel Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CEZ a s and Xcel Energy, you can compare the effects of market volatilities on CEZ A and Xcel 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 CEZ A with a short position of Xcel Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEZ A and Xcel Energy.
Diversification Opportunities for CEZ A and Xcel Energy
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CEZ and Xcel is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CEZ a s and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy and CEZ A 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 CEZ a s are associated (or correlated) with Xcel Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xcel Energy has no effect on the direction of CEZ A i.e., CEZ A and Xcel Energy go up and down completely randomly.
Pair Corralation between CEZ A and Xcel Energy
Assuming the 90 days horizon CEZ a s is expected to generate 1.25 times more return on investment than Xcel Energy. However, CEZ A is 1.25 times more volatile than Xcel Energy. It trades about 0.33 of its potential returns per unit of risk. Xcel Energy is currently generating about -0.06 per unit of risk. If you would invest 3,768 in CEZ a s on November 2, 2024 and sell it today you would earn a total of 502.00 from holding CEZ a s or generate 13.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CEZ a s vs. Xcel Energy
Performance |
| Timeline |
| CEZ a s |
| Xcel Energy |
CEZ A and Xcel Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CEZ A and Xcel Energy
The main advantage of trading using opposite CEZ A and Xcel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEZ A position performs unexpectedly, Xcel 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 Xcel Energy will offset losses from the drop in Xcel Energy's long position.| CEZ A vs. THRACE PLASTICS | CEZ A vs. Plastic Omnium | CEZ A vs. Vulcan Materials | CEZ A vs. The Boston Beer |
| Xcel Energy vs. NextEra Energy | Xcel Energy vs. The Southern | Xcel Energy vs. VERBUND AG | Xcel Energy vs. PGE Corporation |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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