Correlation Between Commercial Vehicle and Sempra

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

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

Diversification Opportunities for Commercial Vehicle and Sempra

0.81

Correlation Coefficient

Commercial Vehicle  Sempra

Very poor diversification

The 3 months correlation between Commercial and Sempra is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Commercial Vehicle Group and Sempra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempra and Commercial Vehicle 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 Commercial Vehicle Group 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 Commercial Vehicle i.e., Commercial Vehicle and Sempra go up and down completely randomly.

Pair Corralation between Commercial Vehicle and Sempra

Assuming the 90 days trading horizon Commercial Vehicle Group is expected to under-perform the Sempra. In addition to that, Commercial Vehicle is 1.1 times more volatile than Sempra. It trades about -0.16 of its total potential returns per unit of risk. Sempra is currently generating about -0.1 per unit of volatility. If you would invest  8,245  in Sempra on December 23, 2024 and sell it today you would lose (1,797) from holding Sempra or give up 21.8% of portfolio value over 90 days.

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

Commercial Vehicle Group  vs.  Sempra

Commercial Vehicle

Risk-Adjusted Performance

Very Weak

Over the last 90 days Commercial Vehicle Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sempra

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sempra has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Commercial Vehicle and Sempra

The main advantage of trading using opposite Commercial Vehicle and Sempra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commercial Vehicle 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 Commercial Vehicle Group 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.