Correlation Between Xcel Energy and PGE

Can any of the company-specific risk be diversified away by investing in both Xcel Energy and PGE 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 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 Corporation, you can compare the effects of market volatilities on Xcel Energy and PGE 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. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xcel Energy and PGE.

Diversification Opportunities for Xcel Energy and PGE

0.91

Correlation Coefficient

Xcel Energy  PGE

Almost no diversification

The 3 months correlation between Xcel and PGE is 0.91. 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 Corporation 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. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corporation has no effect on the direction of Xcel Energy i.e., Xcel Energy and PGE go up and down completely randomly.

Pair Corralation between Xcel Energy and PGE

Assuming the 90 days horizon Xcel Energy is expected to generate 1.06 times more return on investment than PGE. However, Xcel Energy is 1.06 times more volatile than PGE Corporation. It trades about 0.14 of its potential returns per unit of risk. PGE Corporation is currently generating about 0.07 per unit of risk. If you would invest  5,710  in Xcel Energy on September 14, 2024 and sell it today you would earn a total of  814.00  from holding Xcel Energy or generate 14.26% return on investment over 90 days.

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

Xcel Energy  vs.  PGE Corp.

Xcel Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xcel Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xcel Energy reported solid returns over the last few months and may actually be approaching a breakup point.

PGE Corporation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PGE Corporation are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, PGE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Xcel Energy and PGE

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

The idea behind Xcel Energy and PGE Corporation 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.