Correlation Between SCE Trust and Xcel Energy

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

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

Diversification Opportunities for SCE Trust and Xcel Energy

0.39

Correlation Coefficient

SCE Trust  Xcel Energy

Weak diversification

The 3 months correlation between SCE and Xcel is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding SCE Trust IV and Xcel Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Energy and SCE Trust 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 SCE Trust IV 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 SCE Trust i.e., SCE Trust and Xcel Energy go up and down completely randomly.

Pair Corralation between SCE Trust and Xcel Energy

Assuming the 90 days trading horizon SCE Trust IV is expected to generate 0.43 times more return on investment than Xcel Energy. However, SCE Trust IV is 2.35 times less risky than Xcel Energy. It trades about 0.2 of its potential returns per unit of risk. Xcel Energy is currently generating about 0.06 per unit of risk. If you would invest  2,221  in SCE Trust IV on May 5, 2025 and sell it today you would earn a total of  157.00  from holding SCE Trust IV or generate 7.07% return on investment over 90 days.

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

SCE Trust IV  vs.  Xcel Energy

SCE Trust IV

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SCE Trust IV are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, SCE Trust 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 SCE Trust and Xcel Energy

The main advantage of trading using opposite SCE Trust and Xcel Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SCE Trust 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 SCE Trust IV 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..