Correlation Between Edison International and Xcel Energy
Can any of the company-specific risk be diversified away by investing in both Edison International 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 Edison International and Xcel Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Edison International and Xcel Energy, you can compare the effects of market volatilities on Edison International 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 Edison International with a short position of Xcel Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Edison International and Xcel Energy.
Diversification Opportunities for Edison International and Xcel Energy
0.12 | Correlation Coefficient |
Average diversification
The 3 months correlation between Edison and Xcel is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Edison International and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy and Edison International 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 Edison International 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 Edison International i.e., Edison International and Xcel Energy go up and down completely randomly.
Pair Corralation between Edison International and Xcel Energy
Assuming the 90 days horizon Edison International is expected to under-perform the Xcel Energy. In addition to that, Edison International is 1.14 times more volatile than Xcel Energy. It trades about -0.01 of its total potential returns per unit of risk. Xcel Energy is currently generating about 0.03 per unit of volatility. If you would invest 5,913 in Xcel Energy on December 4, 2024 and sell it today you would earn a total of 972.00 from holding Xcel Energy or generate 16.44% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Edison International vs. Xcel Energy
Performance |
Timeline |
Edison International |
Xcel Energy |
Edison International and Xcel Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Edison International and Xcel Energy
The main advantage of trading using opposite Edison International and Xcel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edison International 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.Edison International vs. UNITED UTILITIES GP | Edison International vs. UNIVMUSIC GRPADR050 | Edison International vs. Chesapeake Utilities | Edison International vs. Playa Hotels Resorts |
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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 CEOs Directory module to screen CEOs from public companies around the world.
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