Correlation Between Sempra and Dominion Energy

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

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

Diversification Opportunities for Sempra and Dominion Energy

0.62

Correlation Coefficient

Sempra  Dominion Energy

Poor diversification

The 3 months correlation between Sempra and Dominion is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sempra and Dominion Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominion Energy and Sempra 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 Sempra 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 Sempra i.e., Sempra and Dominion Energy go up and down completely randomly.

Pair Corralation between Sempra and Dominion Energy

Assuming the 90 days horizon Sempra is expected to generate 1.53 times less return on investment than Dominion Energy. But when comparing it to its historical volatility, Sempra is 1.0 times less risky than Dominion Energy. It trades about 0.06 of its potential returns per unit of risk. Dominion Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  4,656  in Dominion Energy on April 25, 2025 and sell it today you would earn a total of  318.00  from holding Dominion Energy or generate 6.83% return on investment over 90 days.

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

Sempra  vs.  Dominion Energy

Sempra

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sempra is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Dominion Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Dominion Energy may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Sempra and Dominion Energy

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