Correlation Between Public Service and Xcel Energy
Can any of the company-specific risk be diversified away by investing in both Public Service 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 Public Service and Xcel Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Public Service Enterprise and Xcel Energy, you can compare the effects of market volatilities on Public Service 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 Public Service with a short position of Xcel Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Service and Xcel Energy.
Diversification Opportunities for Public Service and Xcel Energy
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Public and Xcel is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Public Service Enterprise and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy and Public Service 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 Public Service Enterprise 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 Public Service i.e., Public Service and Xcel Energy go up and down completely randomly.
Pair Corralation between Public Service and Xcel Energy
Considering the 90-day investment horizon Public Service Enterprise is expected to generate 0.73 times more return on investment than Xcel Energy. However, Public Service Enterprise is 1.36 times less risky than Xcel Energy. It trades about 0.29 of its potential returns per unit of risk. Xcel Energy is currently generating about 0.04 per unit of risk. If you would invest 8,319 in Public Service Enterprise on October 20, 2024 and sell it today you would earn a total of 495.00 from holding Public Service Enterprise or generate 5.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Public Service Enterprise vs. Xcel Energy
Performance |
| Timeline |
| Public Service Enterprise |
| Xcel Energy |
Public Service and Xcel Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Public Service and Xcel Energy
The main advantage of trading using opposite Public Service and Xcel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Service 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.| Public Service vs. CenterPoint Energy | Public Service vs. FirstEnergy | Public Service vs. Pinnacle West Capital | Public Service vs. Edison International |
| 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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