Correlation Between Xcel Energy and Consolidated Edison

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

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

Diversification Opportunities for Xcel Energy and Consolidated Edison

0.76

Correlation Coefficient

Xcel Energy  Consolidated Edison

Poor diversification

The 3 months correlation between Xcel and Consolidated is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and Consolidated Edison in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Edison 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 Consolidated Edison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Edison has no effect on the direction of Xcel Energy i.e., Xcel Energy and Consolidated Edison go up and down completely randomly.

Pair Corralation between Xcel Energy and Consolidated Edison

Assuming the 90 days horizon Xcel Energy is expected to generate 0.99 times more return on investment than Consolidated Edison. However, Xcel Energy is 1.01 times less risky than Consolidated Edison. It trades about 0.0 of its potential returns per unit of risk. Consolidated Edison is currently generating about -0.1 per unit of risk. If you would invest  6,117  in Xcel Energy on April 25, 2025 and sell it today you would lose (41.00) from holding Xcel Energy or give up 0.67% of portfolio value over 90 days.

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

Xcel Energy  vs.  Consolidated Edison

Xcel Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xcel Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Xcel Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Consolidated Edison

Risk-Adjusted Performance

Very Weak

Over the last 90 days Consolidated Edison has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain 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.

Pair Trading with Xcel Energy and Consolidated Edison

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

The idea behind Xcel Energy and Consolidated Edison 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.