Correlation Between Nextera Energy and Xcel Energy
Can any of the company-specific risk be diversified away by investing in both Nextera Energy 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 Nextera Energy and Xcel Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nextera Energy and Xcel Energy, you can compare the effects of market volatilities on Nextera Energy 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 Nextera Energy with a short position of Xcel Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nextera Energy and Xcel Energy.
Diversification Opportunities for Nextera Energy and Xcel Energy
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nextera and Xcel is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Nextera Energy and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy and Nextera 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 Nextera Energy 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 Nextera Energy i.e., Nextera Energy and Xcel Energy go up and down completely randomly.
Pair Corralation between Nextera Energy and Xcel Energy
Considering the 90-day investment horizon Nextera Energy is expected to generate 10.51 times less return on investment than Xcel Energy. In addition to that, Nextera Energy is 1.5 times more volatile than Xcel Energy. It trades about 0.01 of its total potential returns per unit of risk. Xcel Energy is currently generating about 0.22 per unit of volatility. 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 Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nextera Energy vs. Xcel Energy
Performance |
| Timeline |
| Nextera Energy |
| Xcel Energy |
Nextera Energy and Xcel Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nextera Energy and Xcel Energy
The main advantage of trading using opposite Nextera Energy and Xcel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nextera Energy 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.| Nextera Energy vs. Skyworks Solutions | Nextera Energy vs. Amkor Technology | Nextera Energy vs. Archrock | Nextera Energy vs. ScanSource |
| 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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