Correlation Between SCOTT TECHNOLOGY and Xcel Energy

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

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

Diversification Opportunities for SCOTT TECHNOLOGY and Xcel Energy

-0.14

Correlation Coefficient

SCOTT TECHNOLOGY  Xcel Energy

Good diversification

The 3 months correlation between SCOTT and Xcel is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding SCOTT TECHNOLOGY and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy and SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY i.e., SCOTT TECHNOLOGY and Xcel Energy go up and down completely randomly.

Pair Corralation between SCOTT TECHNOLOGY and Xcel Energy

Assuming the 90 days trading horizon SCOTT TECHNOLOGY is expected to under-perform the Xcel Energy. In addition to that, SCOTT TECHNOLOGY is 1.34 times more volatile than Xcel Energy. It trades about -0.16 of its total potential returns per unit of risk. Xcel Energy is currently generating about 0.02 per unit of volatility. If you would invest  6,269  in Xcel Energy on December 20, 2024 and sell it today you would earn a total of  82.00  from holding Xcel Energy or generate 1.31% return on investment over 90 days.

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

SCOTT TECHNOLOGY  vs.  Xcel Energy

SCOTT TECHNOLOGY

Risk-Adjusted Performance

Very Weak

Over the last 90 days SCOTT TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Xcel Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xcel Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Xcel Energy is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SCOTT TECHNOLOGY and Xcel Energy

The main advantage of trading using opposite SCOTT TECHNOLOGY and Xcel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCOTT TECHNOLOGY 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 SCOTT TECHNOLOGY 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.