Correlation Between Dominion Energy and AES

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

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

Diversification Opportunities for Dominion Energy and AES

0.14

Correlation Coefficient

Dominion Energy  AES

Average diversification

The 3 months correlation between Dominion and AES is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES 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 AES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES has no effect on the direction of Dominion Energy i.e., Dominion Energy and AES go up and down completely randomly.

Pair Corralation between Dominion Energy and AES

Taking into account the 90-day investment horizon Dominion Energy is expected to generate 0.72 times more return on investment than AES. However, Dominion Energy is 1.39 times less risky than AES. It trades about 0.01 of its potential returns per unit of risk. The AES is currently generating about -0.03 per unit of risk. If you would invest  4,855  in Dominion Energy on January 19, 2024 and sell it today you would earn a total of  2.00  from holding Dominion Energy or generate 0.04% return on investment over 90 days.

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

Dominion Energy  vs.  The AES

Dominion Energy

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Energy are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Dominion Energy may actually be approaching a critical reversion point that can send shares even higher in May 2024.

AES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The AES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, AES is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Dominion Energy and AES

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

The idea behind Dominion Energy and The AES 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.