Correlation Between Hennessy Gas and Dominion Energy

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

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

Diversification Opportunities for Hennessy Gas and Dominion Energy

0.48

Correlation Coefficient

Hennessy Gas  Dominion Energy

Very weak diversification

The 3 months correlation between Hennessy and Dominion is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Hennessy Gas Utility and Dominion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominion Energy and Hennessy Gas 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 Hennessy Gas Utility 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 Hennessy Gas i.e., Hennessy Gas and Dominion Energy go up and down completely randomly.

Pair Corralation between Hennessy Gas and Dominion Energy

Assuming the 90 days horizon Hennessy Gas Utility is expected to generate 0.56 times more return on investment than Dominion Energy. However, Hennessy Gas Utility is 1.79 times less risky than Dominion Energy. It trades about 0.11 of its potential returns per unit of risk. Dominion Energy is currently generating about 0.03 per unit of risk. If you would invest  2,673  in Hennessy Gas Utility on December 28, 2024 and sell it today you would earn a total of  160.00  from holding Hennessy Gas Utility or generate 5.99% return on investment over 90 days.

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

Hennessy Gas Utility  vs.  Dominion Energy

Hennessy Gas Utility

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hennessy Gas Utility are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Hennessy Gas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Dominion Energy

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Energy are ranked lower than 2 (%) 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 Hennessy Gas and Dominion Energy

The main advantage of trading using opposite Hennessy Gas and Dominion Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hennessy Gas 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 Hennessy Gas Utility 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.