Correlation Between Xcel Energy and Eversource Energy
Can any of the company-specific risk be diversified away by investing in both Xcel Energy and Eversource 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 Eversource 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 Eversource Energy, you can compare the effects of market volatilities on Xcel Energy and Eversource 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 Eversource Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xcel Energy and Eversource Energy.
Diversification Opportunities for Xcel Energy and Eversource Energy
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Xcel and Eversource is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and Eversource Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eversource 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 Eversource Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eversource Energy has no effect on the direction of Xcel Energy i.e., Xcel Energy and Eversource Energy go up and down completely randomly.
Pair Corralation between Xcel Energy and Eversource Energy
Considering the 90-day investment horizon Xcel Energy is expected to generate 0.89 times more return on investment than Eversource Energy. However, Xcel Energy is 1.13 times less risky than Eversource Energy. It trades about 0.02 of its potential returns per unit of risk. Eversource Energy is currently generating about -0.02 per unit of risk. If you would invest 6,513 in Xcel Energy on August 30, 2024 and sell it today you would earn a total of 779.00 from holding Xcel Energy or generate 11.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Xcel Energy vs. Eversource Energy
Performance |
| Timeline |
| Xcel Energy |
| Eversource Energy |
Xcel Energy and Eversource Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xcel Energy and Eversource Energy
The main advantage of trading using opposite Xcel Energy and Eversource Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xcel Energy position performs unexpectedly, Eversource 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 Eversource Energy will offset losses from the drop in Eversource Energy's long position.| Xcel Energy vs. Alliant Energy Corp | Xcel Energy vs. Entergy | Xcel Energy vs. Pinnacle West Capital | Xcel Energy vs. CMS Energy |
| Eversource Energy vs. CenterPoint Energy | Eversource Energy vs. FirstEnergy | Eversource Energy vs. Pinnacle West Capital | Eversource Energy vs. Edison International |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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