Correlation Between Dominion Energy and Union Electric
Can any of the company-specific risk be diversified away by investing in both Dominion Energy and Union Electric 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 Union Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dominion Energy and Union Electric, you can compare the effects of market volatilities on Dominion Energy and Union Electric 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 Union Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominion Energy and Union Electric.
Diversification Opportunities for Dominion Energy and Union Electric
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dominion and Union is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and Union Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Electric 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 Union Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Electric has no effect on the direction of Dominion Energy i.e., Dominion Energy and Union Electric go up and down completely randomly.
Pair Corralation between Dominion Energy and Union Electric
Taking into account the 90-day investment horizon Dominion Energy is expected to under-perform the Union Electric. But the stock apears to be less risky and, when comparing its historical volatility, Dominion Energy is 2.23 times less risky than Union Electric. The stock trades about -0.01 of its potential returns per unit of risk. The Union Electric is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 10,000 in Union Electric on September 4, 2024 and sell it today you would earn a total of 1,000.00 from holding Union Electric or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Dominion Energy vs. Union Electric
Performance |
| Timeline |
| Dominion Energy |
| Union Electric |
Dominion Energy and Union Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dominion Energy and Union Electric
The main advantage of trading using opposite Dominion Energy and Union Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominion Energy position performs unexpectedly, Union Electric 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 Union Electric will offset losses from the drop in Union Electric's long position.| Dominion Energy vs. Southern Company | Dominion Energy vs. American Electric Power | Dominion Energy vs. Nextera Energy | Dominion Energy vs. Consolidated Edison |
| Union Electric vs. Afya | Union Electric vs. NRG Energy | Union Electric vs. CenterPoint Energy | Union Electric vs. Skillful Craftsman Education |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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