Correlation Between Xcel Energy and Universal Entertainment

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

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

Diversification Opportunities for Xcel Energy and Universal Entertainment

-0.64

Correlation Coefficient

Xcel Energy  Universal Entertainment

Excellent diversification

The 3 months correlation between Xcel and Universal is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and Universal Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Entertainment 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 Universal Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Entertainment has no effect on the direction of Xcel Energy i.e., Xcel Energy and Universal Entertainment go up and down completely randomly.

Pair Corralation between Xcel Energy and Universal Entertainment

Assuming the 90 days horizon Xcel Energy is expected to generate 5.74 times less return on investment than Universal Entertainment. But when comparing it to its historical volatility, Xcel Energy is 2.2 times less risky than Universal Entertainment. It trades about 0.07 of its potential returns per unit of risk. Universal Entertainment is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  595.00  in Universal Entertainment on October 20, 2024 and sell it today you would earn a total of  55.00  from holding Universal Entertainment or generate 9.24% return on investment over 90 days.

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

Xcel Energy  vs.  Universal Entertainment

Xcel Energy

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xcel Energy are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Xcel Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Universal Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Entertainment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Xcel Energy and Universal Entertainment

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

The idea behind Xcel Energy and Universal Entertainment 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.