Analyzing the Top 5 Most Volatile S&P 500 Utilities


Nov. 20 2020, Updated 1:53 p.m. ET

Utilities more volatile than broader markets

Utilities are generally perceived as safe largely due to their smooth stock price movements and stable dividends. However, utility stocks have been significantly more volatile than the broader markets in the last few years. In this series, we’ll take a look at the top five most volatile stocks among the S&P 500 Utilities Index.

On December 20, 2017, the implied volatility of the Utilities Select Sector SPDR ETF (XLU), which tracks the S&P 500 Utilities Index, was ~12%, while the SPDR S&P 500’s (SPX-INDEX) (SPY) volatility was ~7%. Following SCANA Corporation’s (SCG) nuclear fiasco, the troubled utility’s implied volatility was above 40%—the highest among the S&P 500 utilities.

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Implied volatility

Implied volatility represents investor anxiety. Higher implied volatility is often associated with a fall in stock prices, and vice versa. The implied volatility of US utilities gradually fell in 2017 compared to over the last few years. The sector did well even when interest rates increased gradually.

The implied volatility of NRG Energy (NRG), the largest merchant power player in the country, was significantly high relative to its peers. It was ~40% on December 20, 2017.

California utilities PG&E Corporation (PCG) and Edison International (EIX) witnessed huge surges in volatility following wildfires in the state. Recently, the implied volatilities of both neared 20%. The implied volatility of Virginia-based AES Corporation (AES) was 21% on December 20.

Top utility stocks such as NextEra Energy (NEE) and Duke Energy (DUK) recently had implied volatilities of ~12%.


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