Correlation Between Dominion Energy and Consolidated Water

Can any of the company-specific risk be diversified away by investing in both Dominion Energy and Consolidated Water 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 Consolidated Water into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dominion Energy and Consolidated Water Co, you can compare the effects of market volatilities on Dominion Energy and Consolidated Water 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 Consolidated Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dominion Energy and Consolidated Water.

Diversification Opportunities for Dominion Energy and Consolidated Water

-0.75

Correlation Coefficient

Dominion Energy  Consolidated Water

Pay attention - limited upside

The 3 months correlation between Dominion and Consolidated is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and Consolidated Water Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Water 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 Consolidated Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Water has no effect on the direction of Dominion Energy i.e., Dominion Energy and Consolidated Water go up and down completely randomly.

Pair Corralation between Dominion Energy and Consolidated Water

Taking into account the 90-day investment horizon Dominion Energy is expected to generate 0.64 times more return on investment than Consolidated Water. However, Dominion Energy is 1.56 times less risky than Consolidated Water. It trades about 0.21 of its potential returns per unit of risk. Consolidated Water Co is currently generating about -0.13 per unit of risk. If you would invest  4,479  in Dominion Energy on January 31, 2024 and sell it today you would earn a total of  635.00  from holding Dominion Energy or generate 14.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Dominion Energy  vs.  Consolidated Water Co

Dominion Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Dominion Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Consolidated Water

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consolidated Water Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dominion Energy and Consolidated Water

The main advantage of trading using opposite Dominion Energy and Consolidated Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dominion Energy position performs unexpectedly, Consolidated Water 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 Consolidated Water will offset losses from the drop in Consolidated Water's long position.

The idea behind Dominion Energy and Consolidated Water Co 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.