Correlation Between Engie SA and Sempra

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

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

Diversification Opportunities for Engie SA and Sempra

-0.58

Correlation Coefficient

Engie SA  Sempra

Excellent diversification

The 3 months correlation between Engie and Sempra is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Engie SA and Sempra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempra and Engie 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 Engie SA 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 Engie SA i.e., Engie SA and Sempra go up and down completely randomly.

Pair Corralation between Engie SA and Sempra

Assuming the 90 days horizon Engie SA is expected to generate 1.0 times more return on investment than Sempra. However, Engie SA is 1.0 times less risky than Sempra. It trades about -0.01 of its potential returns per unit of risk. Sempra is currently generating about -0.27 per unit of risk. If you would invest  1,511  in Engie SA on September 25, 2024 and sell it today you would lose (6.00) from holding Engie SA or give up 0.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Engie SA  vs.  Sempra

Engie SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sempra

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sempra reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Engie SA and Sempra

The main advantage of trading using opposite Engie SA and Sempra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engie SA 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 Engie SA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.