Correlation Between Xcel Energy and Consolidated Edison
Can any of the company-specific risk be diversified away by investing in both Xcel Energy and Consolidated Edison 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 Xcel Energy and Consolidated Edison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xcel Energy and Consolidated Edison, you can compare the effects of market volatilities on Xcel Energy and Consolidated Edison 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 Xcel Energy with a short position of Consolidated Edison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xcel Energy and Consolidated Edison.
Diversification Opportunities for Xcel Energy and Consolidated Edison
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Xcel and Consolidated is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and Consolidated Edison in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Edison and Xcel 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 Xcel Energy are associated (or correlated) with Consolidated Edison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Edison has no effect on the direction of Xcel Energy i.e., Xcel Energy and Consolidated Edison go up and down completely randomly.
Pair Corralation between Xcel Energy and Consolidated Edison
Assuming the 90 days horizon Xcel Energy is expected to generate 2.28 times less return on investment than Consolidated Edison. In addition to that, Xcel Energy is 1.6 times more volatile than Consolidated Edison. It trades about 0.07 of its total potential returns per unit of risk. Consolidated Edison is currently generating about 0.25 per unit of volatility. If you would invest 8,618 in Consolidated Edison on October 20, 2024 and sell it today you would earn a total of 328.00 from holding Consolidated Edison or generate 3.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xcel Energy vs. Consolidated Edison
Performance |
| Timeline |
| Xcel Energy |
| Consolidated Edison |
Xcel Energy and Consolidated Edison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xcel Energy and Consolidated Edison
The main advantage of trading using opposite Xcel Energy and Consolidated Edison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xcel Energy position performs unexpectedly, Consolidated Edison 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 Consolidated Edison will offset losses from the drop in Consolidated Edison's long position.| Xcel Energy vs. NextEra Energy | Xcel Energy vs. The Southern | Xcel Energy vs. VERBUND AG | Xcel Energy vs. American Electric Power |
| Consolidated Edison vs. NextEra Energy | Consolidated Edison vs. The Southern | Consolidated Edison vs. VERBUND AG | Consolidated Edison vs. American Electric Power |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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