Correlation Between Apple and Dominion Energy

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

By analyzing existing cross correlation between Apple Inc and Dominion Energy, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Dominion Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Dominion Energy.

Diversification Opportunities for Apple and Dominion Energy

-0.87

Correlation Coefficient

Apple  Dominion Energy

Pay attention - limited upside

The 3 months correlation between Apple and Dominion is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Dominion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominion Energy and Apple 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 Apple Inc 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 Apple i.e., Apple and Dominion Energy go up and down completely randomly.

Pair Corralation between Apple and Dominion Energy

Given the investment horizon of 90 days Apple Inc is expected to under-perform the Dominion Energy. But the stock apears to be less risky and, when comparing its historical volatility, Apple Inc is 1.07 times less risky than Dominion Energy. The stock trades about -0.01 of its potential returns per unit of risk. The Dominion Energy is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  4,668  in Dominion Energy on January 26, 2024 and sell it today you would earn a total of  455.00  from holding Dominion Energy or generate 9.75% return on investment over 90 days.

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

Apple Inc  vs.  Dominion Energy

Apple Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apple Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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 unfluctuating fundamental indicators, Dominion Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apple and Dominion Energy

The main advantage of trading using opposite Apple and Dominion Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.