Correlation Between Enel SpA and Sempra

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

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

Diversification Opportunities for Enel SpA and Sempra

-0.57

Correlation Coefficient

Enel SpA  Sempra

Excellent diversification

The 3 months correlation between Enel and Sempra is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Enel SpA and Sempra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempra and Enel SpA 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 Enel SpA are associated (or correlated) with Sempra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sempra has no effect on the direction of Enel SpA i.e., Enel SpA and Sempra go up and down completely randomly.

Pair Corralation between Enel SpA and Sempra

Assuming the 90 days trading horizon Enel SpA is expected to generate 1.1 times less return on investment than Sempra. In addition to that, Enel SpA is 1.19 times more volatile than Sempra. It trades about 0.07 of its total potential returns per unit of risk. Sempra is currently generating about 0.09 per unit of volatility. If you would invest  6,738  in Sempra on October 13, 2024 and sell it today you would earn a total of  1,244  from holding Sempra or generate 18.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.32%
Values	Daily Returns

Enel SpA  vs.  Sempra

Enel SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enel SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Enel SpA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Sempra

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sempra may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Enel SpA and Sempra

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

The idea behind Enel SpA and Sempra 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.