Correlation Between Xcel Energy and Entergy
Can any of the company-specific risk be diversified away by investing in both Xcel Energy and Entergy 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 Entergy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xcel Energy and Entergy, you can compare the effects of market volatilities on Xcel Energy and Entergy 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 Entergy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xcel Energy and Entergy.
Diversification Opportunities for Xcel Energy and Entergy
-0.13 | Correlation Coefficient |
Good diversification
The 3 months correlation between Xcel and Entergy is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and Entergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy 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 Entergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy has no effect on the direction of Xcel Energy i.e., Xcel Energy and Entergy go up and down completely randomly.
Pair Corralation between Xcel Energy and Entergy
Considering the 90-day investment horizon Xcel Energy is expected to generate 0.73 times more return on investment than Entergy. However, Xcel Energy is 1.38 times less risky than Entergy. It trades about 0.13 of its potential returns per unit of risk. Entergy is currently generating about 0.05 per unit of risk. If you would invest 6,672 in Xcel Energy on November 18, 2024 and sell it today you would earn a total of 189.00 from holding Xcel Energy or generate 2.83% 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. Entergy
Performance |
| Timeline |
| Xcel Energy |
| Entergy |
Xcel Energy and Entergy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xcel Energy and Entergy
The main advantage of trading using opposite Xcel Energy and Entergy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xcel Energy position performs unexpectedly, Entergy 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 Entergy will offset losses from the drop in Entergy's long position.| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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