Correlation Between Dominion Energy and Connecticut Light
Can any of the company-specific risk be diversified away by investing in both Dominion Energy and Connecticut Light 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 Connecticut Light into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dominion Energy and The Connecticut Light, you can compare the effects of market volatilities on Dominion Energy and Connecticut Light 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 Connecticut Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominion Energy and Connecticut Light.
Diversification Opportunities for Dominion Energy and Connecticut Light
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Dominion and Connecticut is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and The Connecticut Light in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connecticut Light 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 Connecticut Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connecticut Light has no effect on the direction of Dominion Energy i.e., Dominion Energy and Connecticut Light go up and down completely randomly.
Pair Corralation between Dominion Energy and Connecticut Light
Taking into account the 90-day investment horizon Dominion Energy is expected to generate 0.76 times more return on investment than Connecticut Light. However, Dominion Energy is 1.32 times less risky than Connecticut Light. It trades about 0.06 of its potential returns per unit of risk. The Connecticut Light is currently generating about 0.04 per unit of risk. If you would invest 4,568 in Dominion Energy on September 14, 2024 and sell it today you would earn a total of 873.50 from holding Dominion Energy or generate 19.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 82.73% |
| Values | Daily Returns |
Dominion Energy vs. The Connecticut Light
Performance |
| Timeline |
| Dominion Energy |
| Connecticut Light |
Dominion Energy and Connecticut Light Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dominion Energy and Connecticut Light
The main advantage of trading using opposite Dominion Energy and Connecticut Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominion Energy position performs unexpectedly, Connecticut Light 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 Connecticut Light will offset losses from the drop in Connecticut Light's long position.| Dominion Energy vs. Southern Company | Dominion Energy vs. American Electric Power | Dominion Energy vs. Nextera Energy | Dominion Energy vs. Consolidated Edison |
| Connecticut Light vs. Avangrid | Connecticut Light vs. Dominion Energy | Connecticut Light vs. Centrais Electricas Brasileiras | Connecticut Light vs. Enel Chile SA |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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