Correlation Between Verde Clean and Dominion Energy

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

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

Diversification Opportunities for Verde Clean and Dominion Energy

0.58

Correlation Coefficient

Verde Clean  Dominion Energy

Very weak diversification

The 3 months correlation between Verde and Dominion is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Verde Clean Fuels and Dominion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominion Energy and Verde Clean 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 Verde Clean Fuels 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 Verde Clean i.e., Verde Clean and Dominion Energy go up and down completely randomly.

Pair Corralation between Verde Clean and Dominion Energy

Assuming the 90 days horizon Verde Clean Fuels is expected to generate 5.88 times more return on investment than Dominion Energy. However, Verde Clean is 5.88 times more volatile than Dominion Energy. It trades about 0.01 of its potential returns per unit of risk. Dominion Energy is currently generating about 0.03 per unit of risk. If you would invest  35.00  in Verde Clean Fuels on December 28, 2024 and sell it today you would lose (7.00) from holding Verde Clean Fuels or give up 20.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.0%
Values	Daily Returns

Verde Clean Fuels  vs.  Dominion Energy

Verde Clean Fuels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Verde Clean Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Verde Clean is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

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 Verde Clean and Dominion Energy

The main advantage of trading using opposite Verde Clean and Dominion Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verde Clean 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 Verde Clean Fuels 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.