Correlation Between Technos SA and Dominion Energy

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

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

Diversification Opportunities for Technos SA and Dominion Energy

0.59

Correlation Coefficient

Technos SA  Dominion Energy

Very weak diversification

The 3 months correlation between Technos and Dominion is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Technos SA and Dominion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominion Energy and Technos SA 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 Technos SA 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 Technos SA i.e., Technos SA and Dominion Energy go up and down completely randomly.

Pair Corralation between Technos SA and Dominion Energy

Assuming the 90 days trading horizon Technos SA is expected to generate 2.11 times more return on investment than Dominion Energy. However, Technos SA is 2.11 times more volatile than Dominion Energy. It trades about 0.06 of its potential returns per unit of risk. Dominion Energy is currently generating about 0.06 per unit of risk. If you would invest  502.00  in Technos SA on September 16, 2024 and sell it today you would earn a total of  47.00  from holding Technos SA or generate 9.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

Technos SA  vs.  Dominion Energy

Technos SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Technos SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Technos SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dominion Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dominion Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Technos SA and Dominion Energy

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

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.