Correlation Between Bayview Acquisition and Xcel Energy

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

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

Diversification Opportunities for Bayview Acquisition and Xcel Energy

-0.23

Correlation Coefficient

Bayview Acquisition  Xcel Energy

Very good diversification

The 3 months correlation between Bayview and Xcel is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bayview Acquisition Corp and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy and Bayview Acquisition 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 Bayview Acquisition Corp 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 Bayview Acquisition i.e., Bayview Acquisition and Xcel Energy go up and down completely randomly.

Pair Corralation between Bayview Acquisition and Xcel Energy

Assuming the 90 days horizon Bayview Acquisition is expected to generate 5.33 times less return on investment than Xcel Energy. But when comparing it to its historical volatility, Bayview Acquisition Corp is 3.01 times less risky than Xcel Energy. It trades about 0.03 of its potential returns per unit of risk. Xcel Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,648  in Xcel Energy on December 28, 2024 and sell it today you would earn a total of  284.00  from holding Xcel Energy or generate 4.27% return on investment over 90 days.

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

Bayview Acquisition Corp  vs.  Xcel Energy

Bayview Acquisition Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bayview Acquisition Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bayview Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Xcel Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xcel Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Xcel Energy is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bayview Acquisition and Xcel Energy

The main advantage of trading using opposite Bayview Acquisition and Xcel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayview Acquisition 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 Bayview Acquisition Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.