Correlation Between Engie Brasil and Dominion Energy

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

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

Diversification Opportunities for Engie Brasil and Dominion Energy

0.47

Correlation Coefficient

Engie Brasil  Dominion Energy

Very weak diversification

The 3 months correlation between Engie and Dominion is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Engie Brasil Energia and Dominion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominion Energy and Engie Brasil 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 Engie Brasil Energia are associated (or correlated) with Dominion Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dominion Energy has no effect on the direction of Engie Brasil i.e., Engie Brasil and Dominion Energy go up and down completely randomly.

Pair Corralation between Engie Brasil and Dominion Energy

Assuming the 90 days horizon Engie Brasil Energia is expected to generate 1.32 times more return on investment than Dominion Energy. However, Engie Brasil is 1.32 times more volatile than Dominion Energy. It trades about 0.13 of its potential returns per unit of risk. Dominion Energy is currently generating about 0.04 per unit of risk. If you would invest  579.00  in Engie Brasil Energia on December 28, 2024 and sell it today you would earn a total of  99.00  from holding Engie Brasil Energia or generate 17.1% return on investment over 90 days.

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

Engie Brasil Energia  vs.  Dominion Energy

Engie Brasil Energia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Engie Brasil Energia are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Engie Brasil showed solid returns over the last few months and may actually be approaching a breakup point.

Dominion Energy

Risk-Adjusted Performance

Weak

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.

Pair Trading with Engie Brasil and Dominion Energy

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

The idea behind Engie Brasil Energia and Dominion 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.