Correlation Between Evergy, and Xcel Energy
Can any of the company-specific risk be diversified away by investing in both Evergy, 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 Evergy, and Xcel Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evergy, and Xcel Energy, you can compare the effects of market volatilities on Evergy, 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 Evergy, with a short position of Xcel Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evergy, and Xcel Energy.
Diversification Opportunities for Evergy, and Xcel Energy
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Evergy, and Xcel is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Evergy, and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy and Evergy, 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 Evergy, 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 Evergy, i.e., Evergy, and Xcel Energy go up and down completely randomly.
Pair Corralation between Evergy, and Xcel Energy
Given the investment horizon of 90 days Evergy, is expected to generate 1.5 times less return on investment than Xcel Energy. But when comparing it to its historical volatility, Evergy, is 1.3 times less risky than Xcel Energy. It trades about 0.19 of its potential returns per unit of risk. Xcel Energy is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 5,274 in Xcel Energy on August 24, 2024 and sell it today you would earn a total of 1,864 from holding Xcel Energy or generate 35.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Evergy, vs. Xcel Energy
Performance |
| Timeline |
| Evergy, |
| Xcel Energy |
Evergy, and Xcel Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evergy, and Xcel Energy
The main advantage of trading using opposite Evergy, and Xcel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evergy, 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.| Evergy, vs. CMS Energy | Evergy, vs. Ameren Corp | Evergy, vs. Pinnacle West Capital | Evergy, vs. MGE Energy |
| Xcel Energy vs. Alliant Energy Corp | Xcel Energy vs. Entergy | Xcel Energy vs. Pinnacle West Capital | Xcel Energy vs. CMS Energy |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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