Correlation Between Xcel Energy and Southern

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

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

Diversification Opportunities for Xcel Energy and Southern

0.55

Correlation Coefficient

Xcel Energy  Southern

Very weak diversification

The 3 months correlation between Xcel and Southern is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and The Southern in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of Xcel Energy i.e., Xcel Energy and Southern go up and down completely randomly.

Pair Corralation between Xcel Energy and Southern

Assuming the 90 days horizon Xcel Energy is expected to generate 3.02 times less return on investment than Southern. In addition to that, Xcel Energy is 1.52 times more volatile than The Southern. It trades about 0.01 of its total potential returns per unit of risk. The Southern is currently generating about 0.06 per unit of volatility. If you would invest  7,728  in The Southern on April 22, 2025 and sell it today you would earn a total of  281.00  from holding The Southern or generate 3.64% return on investment over 90 days.

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

Xcel Energy  vs.  The Southern

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.

Southern

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Southern are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Southern is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Xcel Energy and Southern

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

The idea behind Xcel Energy and The Southern 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 CEOs Directory module to screen CEOs from public companies around the world.