Correlation Between Emera Incorporated and Xcel Energy

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

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

Diversification Opportunities for Emera Incorporated and Xcel Energy

0.36

Correlation Coefficient

Emera Incorporated  Xcel Energy

Weak diversification

The 3 months correlation between Emera and Xcel is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Emera Incorporated and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy and Emera Incorporated 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 Emera Incorporated 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 Emera Incorporated i.e., Emera Incorporated and Xcel Energy go up and down completely randomly.

Pair Corralation between Emera Incorporated and Xcel Energy

Considering the 90-day investment horizon Emera Incorporated is expected to generate 0.79 times more return on investment than Xcel Energy. However, Emera Incorporated is 1.27 times less risky than Xcel Energy. It trades about 0.13 of its potential returns per unit of risk. Xcel Energy is currently generating about 0.06 per unit of risk. If you would invest  4,337  in Emera Incorporated on May 5, 2025 and sell it today you would earn a total of  340.00  from holding Emera Incorporated or generate 7.84% return on investment over 90 days.

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

Emera Incorporated  vs.  Xcel Energy

Emera Incorporated

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Emera Incorporated are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Emera Incorporated may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Xcel Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xcel Energy are ranked lower than 4 (%) 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.

Pair Trading with Emera Incorporated and Xcel Energy

The main advantage of trading using opposite Emera Incorporated and Xcel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emera Incorporated 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 Emera Incorporated 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.