Correlation Between Dominion Energy and Duke Energy
Can any of the company-specific risk be diversified away by investing in both Dominion Energy and Duke 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 Dominion Energy and Duke Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dominion Energy and Duke Energy, you can compare the effects of market volatilities on Dominion Energy and Duke 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 Dominion Energy with a short position of Duke Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominion Energy and Duke Energy.
Diversification Opportunities for Dominion Energy and Duke Energy
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Dominion and Duke is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy 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 Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of Dominion Energy i.e., Dominion Energy and Duke Energy go up and down completely randomly.
Pair Corralation between Dominion Energy and Duke Energy
Taking into account the 90-day investment horizon Dominion Energy is expected to generate 1.14 times less return on investment than Duke Energy. In addition to that, Dominion Energy is 1.26 times more volatile than Duke Energy. It trades about 0.08 of its total potential returns per unit of risk. Duke Energy is currently generating about 0.12 per unit of volatility. If you would invest 9,930 in Duke Energy on August 24, 2024 and sell it today you would earn a total of 1,556 from holding Duke Energy or generate 15.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dominion Energy vs. Duke Energy
Performance |
| Timeline |
| Dominion Energy |
| Duke Energy |
Dominion Energy and Duke Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dominion Energy and Duke Energy
The main advantage of trading using opposite Dominion Energy and Duke Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominion Energy position performs unexpectedly, Duke 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 Duke Energy will offset losses from the drop in Duke Energy's long position.| Dominion Energy vs. Southern Company | Dominion Energy vs. American Electric Power | Dominion Energy vs. Nextera Energy | Dominion Energy vs. Consolidated Edison |
| Duke Energy vs. Consolidated Edison | Duke Energy vs. Dominion Energy | Duke Energy vs. American Electric Power | Duke Energy vs. Nextera Energy |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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