Correlation Between Dominion Energy and Brookfield Renewable

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

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

Diversification Opportunities for Dominion Energy and Brookfield Renewable

0.17

Correlation Coefficient

Dominion Energy  Brookfield Renewable

Average diversification

The 3 months correlation between Dominion and Brookfield is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and Brookfield Renewable Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Renewable Corp and Dominion 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 Dominion Energy are associated (or correlated) with Brookfield Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Renewable Corp has no effect on the direction of Dominion Energy i.e., Dominion Energy and Brookfield Renewable go up and down completely randomly.

Pair Corralation between Dominion Energy and Brookfield Renewable

Taking into account the 90-day investment horizon Dominion Energy is expected to generate 0.8 times more return on investment than Brookfield Renewable. However, Dominion Energy is 1.25 times less risky than Brookfield Renewable. It trades about 0.04 of its potential returns per unit of risk. Brookfield Renewable Corp is currently generating about 0.02 per unit of risk. If you would invest  5,323  in Dominion Energy on December 30, 2024 and sell it today you would earn a total of  176.00  from holding Dominion Energy or generate 3.31% return on investment over 90 days.

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

Dominion Energy  vs.  Brookfield Renewable Corp

Dominion Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dominion Energy is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Brookfield Renewable Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Brookfield Renewable Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Brookfield Renewable is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dominion Energy and Brookfield Renewable

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

The idea behind Dominion Energy and Brookfield Renewable Corp 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.