Correlation Between Xcel Energy and Southern
Can any of the company-specific risk be diversified away by investing in both Xcel Energy and Southern 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 Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Xcel Energy and Southern Company, you can compare the effects of market volatilities on Xcel Energy and Southern 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 Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xcel Energy and Southern.
Diversification Opportunities for Xcel Energy and Southern
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Xcel and Southern is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of Xcel Energy i.e., Xcel Energy and Southern go up and down completely randomly.
Pair Corralation between Xcel Energy and Southern
Considering the 90-day investment horizon Xcel Energy is expected to generate 1.44 times less return on investment than Southern. In addition to that, Xcel Energy is 1.2 times more volatile than Southern Company. It trades about 0.04 of its total potential returns per unit of risk. Southern Company is currently generating about 0.07 per unit of volatility. If you would invest 6,718 in Southern Company on August 31, 2024 and sell it today you would earn a total of 2,195 from holding Southern Company or generate 32.67% 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. Southern Company
Performance |
| Timeline |
| Xcel Energy |
| Southern |
Xcel Energy and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Xcel Energy and Southern
The main advantage of trading using opposite Xcel Energy and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xcel Energy position performs unexpectedly, Southern 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 Southern will offset losses from the drop in Southern's long position.| Xcel Energy vs. Alliant Energy Corp | Xcel Energy vs. Entergy | Xcel Energy vs. Pinnacle West Capital | Xcel Energy vs. CMS Energy |
| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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