Correlation Between PT Bank and Xcel Energy

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

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

Diversification Opportunities for PT Bank and Xcel Energy

-0.79

Correlation Coefficient

PT Bank  Xcel Energy

Pay attention - limited upside

The 3 months correlation between PQ9 and Xcel is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Mandiri and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy and PT Bank 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 PT Bank Mandiri 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 PT Bank i.e., PT Bank and Xcel Energy go up and down completely randomly.

Pair Corralation between PT Bank and Xcel Energy

Assuming the 90 days horizon PT Bank Mandiri is expected to under-perform the Xcel Energy. In addition to that, PT Bank is 2.71 times more volatile than Xcel Energy. It trades about -0.03 of its total potential returns per unit of risk. Xcel Energy is currently generating about 0.14 per unit of volatility. If you would invest  5,699  in Xcel Energy on September 12, 2024 and sell it today you would earn a total of  825.00  from holding Xcel Energy or generate 14.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

PT Bank Mandiri  vs.  Xcel Energy

PT Bank Mandiri

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Mandiri has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Xcel Energy

Risk-Adjusted Performance

11 of 100

OK

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 uncertain basic indicators, Xcel Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Xcel Energy

The main advantage of trading using opposite PT Bank and Xcel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PT Bank 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 PT Bank Mandiri 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.