Correlation Between Xcel Energy and PBF Energy
Can any of the company-specific risk be diversified away by investing in both Xcel Energy and PBF 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 PBF 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 PBF Energy, you can compare the effects of market volatilities on Xcel Energy and PBF 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 PBF Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xcel Energy and PBF Energy.
Diversification Opportunities for Xcel Energy and PBF Energy
-0.45 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Xcel and PBF is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and PBF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBF 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 PBF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBF Energy has no effect on the direction of Xcel Energy i.e., Xcel Energy and PBF Energy go up and down completely randomly.
Pair Corralation between Xcel Energy and PBF Energy
Considering the 90-day investment horizon Xcel Energy is expected to under-perform the PBF Energy. But the stock apears to be less risky and, when comparing its historical volatility, Xcel Energy is 2.27 times less risky than PBF Energy. The stock trades about -0.02 of its potential returns per unit of risk. The PBF Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,054 in PBF Energy on January 25, 2024 and sell it today you would earn a total of 2,685 from holding PBF Energy or generate 87.92% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Xcel Energy vs. PBF Energy
Performance |
Timeline |
Xcel Energy |
PBF Energy |
Xcel Energy and PBF Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Xcel Energy and PBF Energy
The main advantage of trading using opposite Xcel Energy and PBF Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xcel Energy position performs unexpectedly, PBF 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 PBF Energy will offset losses from the drop in PBF Energy's long position.Xcel Energy vs. Centrais Eltricas Brasileiras | Xcel Energy vs. Central Puerto SA | Xcel Energy vs. CMS Energy | Xcel Energy vs. Centrais Electricas Brasileiras |
PBF Energy vs. Delek Logistics Partners | PBF Energy vs. Crossamerica Partners LP | PBF Energy vs. Sunoco LP |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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