Correlation Between The Gabelli and Dominion Energy

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

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

Diversification Opportunities for The Gabelli and Dominion Energy

0.66

Correlation Coefficient

The Gabelli  Dominion Energy

Poor diversification

The 3 months correlation between The and Dominion is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Gabelli Utilities and Dominion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominion Energy and The Gabelli 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 The Gabelli Utilities 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 The Gabelli i.e., The Gabelli and Dominion Energy go up and down completely randomly.

Pair Corralation between The Gabelli and Dominion Energy

Assuming the 90 days horizon The Gabelli Utilities is expected to generate 0.48 times more return on investment than Dominion Energy. However, The Gabelli Utilities is 2.1 times less risky than Dominion Energy. It trades about 0.21 of its potential returns per unit of risk. Dominion Energy is currently generating about 0.02 per unit of risk. If you would invest  568.00  in The Gabelli Utilities on December 4, 2024 and sell it today you would earn a total of  17.00  from holding The Gabelli Utilities or generate 2.99% return on investment over 90 days.

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

The Gabelli Utilities  vs.  Dominion Energy

Gabelli Utilities

Risk-Adjusted Performance

Very Weak

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

Dominion Energy

Risk-Adjusted Performance

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.

Pair Trading with The Gabelli and Dominion Energy

The main advantage of trading using opposite The Gabelli and Dominion Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if The Gabelli 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 The Gabelli Utilities 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.