Correlation Between Public Service and Dominion Energy

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Can any of the company-specific risk be diversified away by investing in both Public Service 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 Public Service and Dominion Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Public Service Enterprise and Dominion Energy, you can compare the effects of market volatilities on Public Service 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 Public Service with a short position of Dominion Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Service and Dominion Energy.

Diversification Opportunities for Public Service and Dominion Energy

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Public and Dominion is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Public Service Enterprise and Dominion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominion Energy and Public Service 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 Public Service Enterprise 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 Public Service i.e., Public Service and Dominion Energy go up and down completely randomly.

Pair Corralation between Public Service and Dominion Energy

Considering the 90-day investment horizon Public Service Enterprise is expected to generate 0.8 times more return on investment than Dominion Energy. However, Public Service Enterprise is 1.25 times less risky than Dominion Energy. It trades about 0.03 of its potential returns per unit of risk. Dominion Energy is currently generating about -0.05 per unit of risk. If you would invest  5,749  in Public Service Enterprise on December 19, 2023 and sell it today you would earn a total of  654.00  from holding Public Service Enterprise or generate 11.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy99.73%
ValuesDaily Returns

Public Service Enterprise  vs.  Dominion Energy

 Performance 
       Timeline  
Public Service Enterprise 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Public Service Enterprise are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Public Service is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.
Dominion Energy 

Risk-Adjusted Performance

2 of 100

 
Low
 
High
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Dominion Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Public Service and Dominion Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Public Service and Dominion Energy

The main advantage of trading using opposite Public Service and Dominion Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Service 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 Public Service Enterprise 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.
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 CEOs Directory module to screen CEOs from public companies around the world.

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