Correlation Between Dominion Energy and PPL
Can any of the company-specific risk be diversified away by investing in both Dominion Energy and PPL 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 PPL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dominion Energy and PPL Corporation, you can compare the effects of market volatilities on Dominion Energy and PPL 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 PPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominion Energy and PPL.
Diversification Opportunities for Dominion Energy and PPL
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Dominion and PPL is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation 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 PPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPL Corporation has no effect on the direction of Dominion Energy i.e., Dominion Energy and PPL go up and down completely randomly.
Pair Corralation between Dominion Energy and PPL
Taking into account the 90-day investment horizon Dominion Energy is expected to generate 4.33 times less return on investment than PPL. In addition to that, Dominion Energy is 1.14 times more volatile than PPL Corporation. It trades about 0.07 of its total potential returns per unit of risk. PPL Corporation is currently generating about 0.33 per unit of volatility. If you would invest 3,212 in PPL Corporation on August 30, 2024 and sell it today you would earn a total of 288.00 from holding PPL Corporation or generate 8.97% 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. PPL Corp.
Performance |
| Timeline |
| Dominion Energy |
| PPL Corporation |
Dominion Energy and PPL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dominion Energy and PPL
The main advantage of trading using opposite Dominion Energy and PPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominion Energy position performs unexpectedly, PPL 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 PPL will offset losses from the drop in PPL's long position.| Dominion Energy vs. Southern Company | Dominion Energy vs. American Electric Power | Dominion Energy vs. Nextera Energy | Dominion Energy vs. Consolidated Edison |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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