Correlation Between Dominion Energy and Hertz Global

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

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

Diversification Opportunities for Dominion Energy and Hertz Global

-0.82

Correlation Coefficient

Dominion Energy  Hertz Global

Pay attention - limited upside

The 3 months correlation between Dominion and Hertz is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dominion Energy and Hertz Global Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hertz Global Holdings 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 Hertz Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hertz Global Holdings has no effect on the direction of Dominion Energy i.e., Dominion Energy and Hertz Global go up and down completely randomly.

Pair Corralation between Dominion Energy and Hertz Global

Taking into account the 90-day investment horizon Dominion Energy is expected to generate 0.38 times more return on investment than Hertz Global. However, Dominion Energy is 2.66 times less risky than Hertz Global. It trades about 0.16 of its potential returns per unit of risk. Hertz Global Holdings is currently generating about -0.16 per unit of risk. If you would invest  4,460  in Dominion Energy on February 11, 2024 and sell it today you would earn a total of  847.00  from holding Dominion Energy or generate 18.99% return on investment over 90 days.

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

Dominion Energy  vs.  Hertz Global Holdings

Dominion Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Energy are ranked lower than 12 (%) 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.

Hertz Global Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hertz Global Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Dominion Energy and Hertz Global

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

The idea behind Dominion Energy and Hertz Global Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.