Correlation Between AES and Dominion Energy
Can any of the company-specific risk be diversified away by investing in both AES and Dominion 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 AES and Dominion Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The AES and Dominion Energy, you can compare the effects of market volatilities on AES and Dominion 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 AES with a short position of Dominion Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and Dominion Energy.
Diversification Opportunities for AES and Dominion Energy
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between AES and Dominion is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Dominion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominion Energy and AES 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 The AES are associated (or correlated) with Dominion Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dominion Energy has no effect on the direction of AES i.e., AES and Dominion Energy go up and down completely randomly.
Pair Corralation between AES and Dominion Energy
Considering the 90-day investment horizon The AES is expected to generate 1.36 times more return on investment than Dominion Energy. However, AES is 1.36 times more volatile than Dominion Energy. It trades about 0.09 of its potential returns per unit of risk. Dominion Energy is currently generating about 0.08 per unit of risk. If you would invest 1,576 in The AES on January 21, 2024 and sell it today you would earn a total of 64.00 from holding The AES or generate 4.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The AES vs. Dominion Energy
Performance |
| Timeline |
| AES |
| Dominion Energy |
AES and Dominion Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AES and Dominion Energy
The main advantage of trading using opposite AES and Dominion Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES position performs unexpectedly, Dominion 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 Dominion Energy will offset losses from the drop in Dominion Energy's long position.The idea behind The AES and Dominion Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Dominion Energy vs. American Electric Power | Dominion Energy vs. Nextera Energy | Dominion Energy vs. Aquagold International | Dominion Energy vs. Morningstar Unconstrained Allocation |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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