Correlation Between Dominion Energy and Companhia Paranaense

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

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

Diversification Opportunities for Dominion Energy and Companhia Paranaense

-0.74

Correlation Coefficient

Dominion Energy  Companhia Paranaense

Pay attention - limited upside

The 3 months correlation between Dominion and Companhia is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense 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 Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of Dominion Energy i.e., Dominion Energy and Companhia Paranaense go up and down completely randomly.

Pair Corralation between Dominion Energy and Companhia Paranaense

Taking into account the 90-day investment horizon Dominion Energy is expected to under-perform the Companhia Paranaense. But the stock apears to be less risky and, when comparing its historical volatility, Dominion Energy is 1.47 times less risky than Companhia Paranaense. The stock trades about -0.04 of its potential returns per unit of risk. The Companhia Paranaense de is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  526.00  in Companhia Paranaense de on February 4, 2024 and sell it today you would earn a total of  227.00  from holding Companhia Paranaense de or generate 43.16% 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.  Companhia Paranaense de

Dominion Energy

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Energy are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Dominion Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Companhia Paranaense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Paranaense de has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Companhia Paranaense is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Dominion Energy and Companhia Paranaense

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

The idea behind Dominion Energy and Companhia Paranaense de 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..