Correlation Between Dominion Energy and Duke Energy

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

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

Diversification Opportunities for Dominion Energy and Duke Energy

0.6

Correlation Coefficient

Dominion Energy  Duke Energy

Poor diversification

The 3 months correlation between Dominion and Duke is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy 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 Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of Dominion Energy i.e., Dominion Energy and Duke Energy go up and down completely randomly.

Pair Corralation between Dominion Energy and Duke Energy

Taking into account the 90-day investment horizon Dominion Energy is expected to generate 3.11 times less return on investment than Duke Energy. In addition to that, Dominion Energy is 1.52 times more volatile than Duke Energy. It trades about 0.03 of its total potential returns per unit of risk. Duke Energy is currently generating about 0.14 per unit of volatility. If you would invest  10,735  in Duke Energy on December 27, 2024 and sell it today you would earn a total of  1,030  from holding Duke Energy or generate 9.59% return on investment over 90 days.

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

Dominion Energy  vs.  Duke Energy

Dominion Energy

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Energy are ranked lower than 2 (%) 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.

Duke Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Duke Energy are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Duke Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dominion Energy and Duke Energy

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

The idea behind Dominion Energy and Duke 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.