Correlation Between CENTURIA OFFICE and Xcel Energy

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

By analyzing existing cross correlation between CENTURIA OFFICE REIT and Xcel Energy, you can compare the effects of market volatilities on CENTURIA OFFICE and Xcel 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 CENTURIA OFFICE with a short position of Xcel Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of CENTURIA OFFICE and Xcel Energy.

Diversification Opportunities for CENTURIA OFFICE and Xcel Energy

0.34

Correlation Coefficient

CENTURIA OFFICE  Xcel Energy

Weak diversification

The 3 months correlation between CENTURIA and Xcel is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding CENTURIA OFFICE REIT and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy and CENTURIA OFFICE 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 CENTURIA OFFICE REIT are associated (or correlated) with Xcel Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xcel Energy has no effect on the direction of CENTURIA OFFICE i.e., CENTURIA OFFICE and Xcel Energy go up and down completely randomly.

Pair Corralation between CENTURIA OFFICE and Xcel Energy

Assuming the 90 days horizon CENTURIA OFFICE REIT is expected to generate 1.37 times more return on investment than Xcel Energy. However, CENTURIA OFFICE is 1.37 times more volatile than Xcel Energy. It trades about 0.04 of its potential returns per unit of risk. Xcel Energy is currently generating about 0.03 per unit of risk. If you would invest  62.00  in CENTURIA OFFICE REIT on December 20, 2024 and sell it today you would earn a total of  2.00  from holding CENTURIA OFFICE REIT or generate 3.23% return on investment over 90 days.

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

CENTURIA OFFICE REIT  vs.  Xcel Energy

CENTURIA OFFICE REIT

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CENTURIA OFFICE REIT are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CENTURIA OFFICE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Xcel Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xcel Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xcel Energy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CENTURIA OFFICE and Xcel Energy

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

The idea behind CENTURIA OFFICE REIT and Xcel Energy 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.