Correlation Between Xcel Energy and PGE Corp

Can any of the company-specific risk be diversified away by investing in both Xcel Energy and PGE Corp 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 PGE Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Xcel Energy and PGE Corp, you can compare the effects of market volatilities on Xcel Energy and PGE Corp 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 PGE Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xcel Energy and PGE Corp.

Diversification Opportunities for Xcel Energy and PGE Corp

0.11

Correlation Coefficient

Xcel Energy  PGE Corp

Average diversification

The 3 months correlation between Xcel and PGE is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and PGE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE Corp 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 PGE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corp has no effect on the direction of Xcel Energy i.e., Xcel Energy and PGE Corp go up and down completely randomly.

Pair Corralation between Xcel Energy and PGE Corp

Considering the 90-day investment horizon Xcel Energy is expected to under-perform the PGE Corp. In addition to that, Xcel Energy is 1.4 times more volatile than PGE Corp. It trades about -0.09 of its total potential returns per unit of risk. PGE Corp is currently generating about -0.01 per unit of volatility. If you would invest  1,804  in PGE Corp on February 7, 2024 and sell it today you would lose (37.00) from holding PGE Corp or give up 2.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Xcel Energy  vs.  PGE Corp

Xcel Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xcel Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Xcel Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

PGE Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PGE Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, PGE Corp may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Xcel Energy and PGE Corp

The main advantage of trading using opposite Xcel Energy and PGE Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xcel Energy position performs unexpectedly, PGE Corp 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 PGE Corp will offset losses from the drop in PGE Corp's long position.

The idea behind Xcel Energy and PGE Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.