Correlation Between Dominion Energy and Ameren Corp
Can any of the company-specific risk be diversified away by investing in both Dominion Energy and Ameren Corp 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 Dominion Energy and Ameren Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dominion Energy and Ameren Corp, you can compare the effects of market volatilities on Dominion Energy and Ameren Corp 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 Dominion Energy with a short position of Ameren Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominion Energy and Ameren Corp.
Diversification Opportunities for Dominion Energy and Ameren Corp
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dominion and Ameren is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and Ameren Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Corp and Dominion Energy 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 Dominion Energy are associated (or correlated) with Ameren Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Corp has no effect on the direction of Dominion Energy i.e., Dominion Energy and Ameren Corp go up and down completely randomly.
Pair Corralation between Dominion Energy and Ameren Corp
Taking into account the 90-day investment horizon Dominion Energy is expected to under-perform the Ameren Corp. But the stock apears to be less risky and, when comparing its historical volatility, Dominion Energy is 1.07 times less risky than Ameren Corp. The stock trades about 0.0 of its potential returns per unit of risk. The Ameren Corp is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 8,711 in Ameren Corp on September 1, 2024 and sell it today you would earn a total of 728.00 from holding Ameren Corp or generate 8.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dominion Energy vs. Ameren Corp
Performance |
| Timeline |
| Dominion Energy |
| Ameren Corp |
Dominion Energy and Ameren Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dominion Energy and Ameren Corp
The main advantage of trading using opposite Dominion Energy and Ameren Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominion Energy position performs unexpectedly, Ameren Corp 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 Ameren Corp will offset losses from the drop in Ameren Corp's long position.| Dominion Energy vs. Entergy | Dominion Energy vs. Ameren Corp | Dominion Energy vs. CenterPoint Energy | Dominion Energy vs. Alliant Energy Corp |
| Ameren Corp vs. CMS Energy | Ameren Corp vs. Pinnacle West Capital | Ameren Corp vs. MGE Energy | Ameren Corp vs. Evergy, |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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