Correlation Between Dominion Energy and NiSource
Can any of the company-specific risk be diversified away by investing in both Dominion Energy and NiSource 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 NiSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dominion Energy and NiSource, you can compare the effects of market volatilities on Dominion Energy and NiSource 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 NiSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominion Energy and NiSource.
Diversification Opportunities for Dominion Energy and NiSource
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dominion and NiSource is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource 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 NiSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NiSource has no effect on the direction of Dominion Energy i.e., Dominion Energy and NiSource go up and down completely randomly.
Pair Corralation between Dominion Energy and NiSource
Taking into account the 90-day investment horizon Dominion Energy is expected to generate 2.6 times less return on investment than NiSource. In addition to that, Dominion Energy is 1.26 times more volatile than NiSource. It trades about 0.02 of its total potential returns per unit of risk. NiSource is currently generating about 0.08 per unit of volatility. If you would invest 2,547 in NiSource on August 30, 2024 and sell it today you would earn a total of 1,278 from holding NiSource or generate 50.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dominion Energy vs. NiSource
Performance |
| Timeline |
| Dominion Energy |
| NiSource |
Dominion Energy and NiSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dominion Energy and NiSource
The main advantage of trading using opposite Dominion Energy and NiSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominion Energy position performs unexpectedly, NiSource 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 NiSource will offset losses from the drop in NiSource's long position.| Dominion Energy vs. Southern Company | Dominion Energy vs. American Electric Power | Dominion Energy vs. Nextera Energy | Dominion Energy vs. Consolidated Edison |
| NiSource vs. NewJersey Resources | NiSource vs. UGI Corporation | NiSource vs. Spire Inc | NiSource vs. Chesapeake Utilities |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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