Correlation Between Ford and Xcel Energy
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Xcel Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Xcel Energy, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Xcel Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Xcel Energy.
Diversification Opportunities for Ford and Xcel Energy
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Ford and Xcel is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy and Ford 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 Ford Motor 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 Ford i.e., Ford and Xcel Energy go up and down completely randomly.
Pair Corralation between Ford and Xcel Energy
Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Xcel Energy. In addition to that, Ford is 1.7 times more volatile than Xcel Energy. It trades about 0.0 of its total potential returns per unit of risk. Xcel Energy is currently generating about 0.3 per unit of volatility. If you would invest 6,432 in Xcel Energy on August 24, 2024 and sell it today you would earn a total of 706.00 from holding Xcel Energy or generate 10.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ford Motor vs. Xcel Energy
Performance |
| Timeline |
| Ford Motor |
| Xcel Energy |
Ford and Xcel Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Xcel Energy
The main advantage of trading using opposite Ford and Xcel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.The idea behind Ford Motor and Xcel 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.| Xcel Energy vs. Korea Electric Power | Xcel Energy vs. Centrais Electricas Brasileiras | Xcel Energy vs. MGE Energy | Xcel Energy vs. IDACORP |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes |