Correlation Between Xcel Energy and Entergy

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

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

Diversification Opportunities for Xcel Energy and Entergy

0.65

Correlation Coefficient

Xcel Energy  Entergy

Poor diversification

The 3 months correlation between Xcel and Entergy is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and Entergy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy 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 Entergy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy has no effect on the direction of Xcel Energy i.e., Xcel Energy and Entergy go up and down completely randomly.

Pair Corralation between Xcel Energy and Entergy

Considering the 90-day investment horizon Xcel Energy is expected to generate 0.96 times more return on investment than Entergy. However, Xcel Energy is 1.05 times less risky than Entergy. It trades about 0.02 of its potential returns per unit of risk. Entergy is currently generating about -0.01 per unit of risk. If you would invest  6,945  in Xcel Energy on March 4, 2025 and sell it today you would earn a total of  65.00  from holding Xcel Energy or generate 0.94% return on investment over 90 days.

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

Xcel Energy  vs.  Entergy

Xcel Energy

Risk-Adjusted Performance

Very 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 quite persistent technical and fundamental indicators, Xcel Energy is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Entergy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entergy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Entergy is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Xcel Energy and Entergy

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

The idea behind Xcel Energy and Entergy 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..