Correlation Between Dominion Energy and IDACORP

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

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

Diversification Opportunities for Dominion Energy and IDACORP

-0.15

Correlation Coefficient

Dominion Energy  IDACORP

Good diversification

The 3 months correlation between Dominion and IDACORP is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and IDACORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDACORP 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 IDACORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDACORP has no effect on the direction of Dominion Energy i.e., Dominion Energy and IDACORP go up and down completely randomly.

Pair Corralation between Dominion Energy and IDACORP

Taking into account the 90-day investment horizon Dominion Energy is expected to under-perform the IDACORP. In addition to that, Dominion Energy is 1.23 times more volatile than IDACORP. It trades about -0.01 of its total potential returns per unit of risk. IDACORP is currently generating about 0.15 per unit of volatility. If you would invest  9,930  in IDACORP on October 10, 2024 and sell it today you would earn a total of  995.00  from holding IDACORP or generate 10.02% return on investment over 90 days.

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

Dominion Energy  vs.  IDACORP

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.

IDACORP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IDACORP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, IDACORP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Dominion Energy and IDACORP

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

The idea behind Dominion Energy and IDACORP 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .