Correlation Between Endesa SA and Dominion Energy

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

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

Diversification Opportunities for Endesa SA and Dominion Energy

0.24

Correlation Coefficient

Endesa SA  Dominion Energy

Modest diversification

The 3 months correlation between Endesa and Dominion is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Endesa SA ADR and Dominion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominion Energy and Endesa SA 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 Endesa SA ADR 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 Endesa SA i.e., Endesa SA and Dominion Energy go up and down completely randomly.

Pair Corralation between Endesa SA and Dominion Energy

Assuming the 90 days horizon Endesa SA ADR is expected to generate 0.92 times more return on investment than Dominion Energy. However, Endesa SA ADR is 1.08 times less risky than Dominion Energy. It trades about 0.23 of its potential returns per unit of risk. Dominion Energy is currently generating about 0.04 per unit of risk. If you would invest  1,066  in Endesa SA ADR on December 28, 2024 and sell it today you would earn a total of  244.00  from holding Endesa SA ADR or generate 22.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Endesa SA ADR  vs.  Dominion Energy

Endesa SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Endesa SA ADR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Endesa SA 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 Endesa SA and Dominion Energy

The main advantage of trading using opposite Endesa SA and Dominion Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endesa SA 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 Endesa SA ADR 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.