Correlation Between Xcel Energy and CenterPoint Energy

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

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

Diversification Opportunities for Xcel Energy and CenterPoint Energy

0.69

Correlation Coefficient

Xcel Energy  CenterPoint Energy

Poor diversification

The 3 months correlation between Xcel and CenterPoint is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Xcel Energy and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy 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 CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of Xcel Energy i.e., Xcel Energy and CenterPoint Energy go up and down completely randomly.

Pair Corralation between Xcel Energy and CenterPoint Energy

Considering the 90-day investment horizon Xcel Energy is expected to generate 1.28 times more return on investment than CenterPoint Energy. However, Xcel Energy is 1.28 times more volatile than CenterPoint Energy. It trades about 0.08 of its potential returns per unit of risk. CenterPoint Energy is currently generating about -0.03 per unit of risk. If you would invest  6,843  in Xcel Energy on April 25, 2025 and sell it today you would earn a total of  407.00  from holding Xcel Energy or generate 5.95% 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.  CenterPoint Energy

Xcel Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Xcel Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, Xcel Energy may actually be approaching a critical reversion point that can send shares even higher in August 2025.

CenterPoint Energy

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Xcel Energy and CenterPoint Energy

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

The idea behind Xcel Energy and CenterPoint 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.