Correlation Between Dominion Energy and Avangrid
Can any of the company-specific risk be diversified away by investing in both Dominion Energy and Avangrid 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 Avangrid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dominion Energy and Avangrid, you can compare the effects of market volatilities on Dominion Energy and Avangrid 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 Avangrid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominion Energy and Avangrid.
Diversification Opportunities for Dominion Energy and Avangrid
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Dominion and Avangrid is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and Avangrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avangrid 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 Avangrid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avangrid has no effect on the direction of Dominion Energy i.e., Dominion Energy and Avangrid go up and down completely randomly.
Pair Corralation between Dominion Energy and Avangrid
Taking into account the 90-day investment horizon Dominion Energy is expected to generate 1.04 times less return on investment than Avangrid. But when comparing it to its historical volatility, Dominion Energy is 1.13 times less risky than Avangrid. It trades about 0.12 of its potential returns per unit of risk. Avangrid is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,854 in Avangrid on January 19, 2024 and sell it today you would earn a total of 770.00 from holding Avangrid or generate 26.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dominion Energy vs. Avangrid
Performance |
| Timeline |
| Dominion Energy |
| Avangrid |
Dominion Energy and Avangrid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dominion Energy and Avangrid
The main advantage of trading using opposite Dominion Energy and Avangrid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominion Energy position performs unexpectedly, Avangrid 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 Avangrid will offset losses from the drop in Avangrid's long position.| Dominion Energy vs. Southern Company | Dominion Energy vs. American Electric Power | Dominion Energy vs. Nextera Energy | Dominion Energy vs. Consolidated Edison |
| Avangrid vs. Alliant Energy Corp | Avangrid vs. CMS Energy | Avangrid vs. DTE Energy | Avangrid vs. Evergy Common Stock |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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