Correlation Between Dominion Energy and Utilities Portfolio

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

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

Diversification Opportunities for Dominion Energy and Utilities Portfolio

0.55

Correlation Coefficient

Dominion Energy  Utilities Portfolio

Very weak diversification

The 3 months correlation between Dominion and Utilities is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and Utilities Portfolio Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Portfolio 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 Utilities Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Portfolio has no effect on the direction of Dominion Energy i.e., Dominion Energy and Utilities Portfolio go up and down completely randomly.

Pair Corralation between Dominion Energy and Utilities Portfolio

Taking into account the 90-day investment horizon Dominion Energy is expected to under-perform the Utilities Portfolio. In addition to that, Dominion Energy is 1.25 times more volatile than Utilities Portfolio Utilities. It trades about -0.05 of its total potential returns per unit of risk. Utilities Portfolio Utilities is currently generating about 0.0 per unit of volatility. If you would invest  12,530  in Utilities Portfolio Utilities on September 26, 2024 and sell it today you would lose (22.00) from holding Utilities Portfolio Utilities or give up 0.18% of portfolio value over 90 days.

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

Dominion Energy  vs.  Utilities Portfolio Utilities

Dominion Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dominion Energy has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Utilities Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Utilities Portfolio Utilities has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Utilities Portfolio is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dominion Energy and Utilities Portfolio

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

The idea behind Dominion Energy and Utilities Portfolio Utilities 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.