Correlation Between Analog Devices and DOMINION

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

By analyzing existing cross correlation between Analog Devices and DOMINION ENERGY INC, you can compare the effects of market volatilities on Analog Devices and DOMINION 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 Analog Devices with a short position of DOMINION. Check out your portfolio center. Please also check ongoing floating volatility patterns of Analog Devices and DOMINION.

Diversification Opportunities for Analog Devices and DOMINION

0.5

Correlation Coefficient

Analog Devices  DOMINION

Very weak diversification

The 3 months correlation between Analog and DOMINION is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Analog Devices and DOMINION ENERGY INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOMINION ENERGY INC and Analog Devices 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 Analog Devices are associated (or correlated) with DOMINION. 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 INC has no effect on the direction of Analog Devices i.e., Analog Devices and DOMINION go up and down completely randomly.

Pair Corralation between Analog Devices and DOMINION

Considering the 90-day investment horizon Analog Devices is expected to under-perform the DOMINION. In addition to that, Analog Devices is 1.85 times more volatile than DOMINION ENERGY INC. It trades about -0.02 of its total potential returns per unit of risk. DOMINION ENERGY INC is currently generating about 0.1 per unit of volatility. If you would invest  8,705  in DOMINION ENERGY INC on September 4, 2024 and sell it today you would earn a total of  80.00  from holding DOMINION ENERGY INC or generate 0.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	42.86%
Values	Daily Returns

Analog Devices  vs.  DOMINION ENERGY INC

Analog Devices

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Analog Devices are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

DOMINION ENERGY INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOMINION ENERGY INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DOMINION is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Analog Devices and DOMINION

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

The idea behind Analog Devices and DOMINION ENERGY INC 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.