Correlation Between Xcel Energy and Clearway Energy
Can any of the company-specific risk be diversified away by investing in both Xcel Energy and Clearway 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 Xcel Energy and Clearway Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xcel Energy and Clearway Energy, you can compare the effects of market volatilities on Xcel Energy and Clearway 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 Xcel Energy with a short position of Clearway Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xcel Energy and Clearway Energy.
Diversification Opportunities for Xcel Energy and Clearway Energy
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Xcel and Clearway is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and Clearway Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clearway Energy 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 Clearway Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clearway Energy has no effect on the direction of Xcel Energy i.e., Xcel Energy and Clearway Energy go up and down completely randomly.
Pair Corralation between Xcel Energy and Clearway Energy
Assuming the 90 days horizon Xcel Energy is expected to generate 0.86 times more return on investment than Clearway Energy. However, Xcel Energy is 1.16 times less risky than Clearway Energy. It trades about -0.2 of its potential returns per unit of risk. Clearway Energy is currently generating about -0.27 per unit of risk. If you would invest 6,409 in Xcel Energy on October 16, 2024 and sell it today you would lose (266.00) from holding Xcel Energy or give up 4.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xcel Energy vs. Clearway Energy
Performance |
| Timeline |
| Xcel Energy |
| Clearway Energy |
Xcel Energy and Clearway Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xcel Energy and Clearway Energy
The main advantage of trading using opposite Xcel Energy and Clearway Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xcel Energy position performs unexpectedly, Clearway 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 Clearway Energy will offset losses from the drop in Clearway Energy's long position.| Xcel Energy vs. NextEra Energy | Xcel Energy vs. Superior Plus Corp | Xcel Energy vs. NMI Holdings | Xcel Energy vs. SIVERS SEMICONDUCTORS AB |
| Clearway Energy vs. NextEra Energy | Clearway Energy vs. Xcel Energy | Clearway Energy vs. Superior Plus Corp | Clearway Energy vs. NMI Holdings |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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