Correlation Between Consolidated Edison and Dominion Energy
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison 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 Consolidated Edison and Dominion Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and Dominion Energy, you can compare the effects of market volatilities on Consolidated Edison 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 Consolidated Edison with a short position of Dominion Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and Dominion Energy.
Diversification Opportunities for Consolidated Edison and Dominion Energy
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Consolidated and Dominion is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and Dominion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominion Energy and Consolidated Edison 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 Consolidated Edison 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 Consolidated Edison i.e., Consolidated Edison and Dominion Energy go up and down completely randomly.
Pair Corralation between Consolidated Edison and Dominion Energy
Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 0.85 times more return on investment than Dominion Energy. However, Consolidated Edison is 1.18 times less risky than Dominion Energy. It trades about 0.08 of its potential returns per unit of risk. Dominion Energy is currently generating about 0.03 per unit of risk. If you would invest 8,904 in Consolidated Edison on January 20, 2024 and sell it today you would earn a total of 186.00 from holding Consolidated Edison or generate 2.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Consolidated Edison vs. Dominion Energy
Performance |
| Timeline |
| Consolidated Edison |
| Dominion Energy |
Consolidated Edison and Dominion Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and Dominion Energy
The main advantage of trading using opposite Consolidated Edison and Dominion Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison 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.| Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy | Consolidated Edison vs. Aquagold International | Consolidated Edison vs. Morningstar Unconstrained Allocation |
| 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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