Correlation Between Montauk Renewables and Sempra Energy

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

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

Diversification Opportunities for Montauk Renewables and Sempra Energy

-0.63

Correlation Coefficient

Montauk Renewables  Sempra Energy

Excellent diversification

The 3 months correlation between Montauk and Sempra is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Sempra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempra Energy and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with Sempra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sempra Energy has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Sempra Energy go up and down completely randomly.

Pair Corralation between Montauk Renewables and Sempra Energy

Given the investment horizon of 90 days Montauk Renewables is expected to generate 4.8 times more return on investment than Sempra Energy. However, Montauk Renewables is 4.8 times more volatile than Sempra Energy. It trades about 0.29 of its potential returns per unit of risk. Sempra Energy is currently generating about -0.06 per unit of risk. If you would invest  391.00  in Montauk Renewables on October 8, 2024 and sell it today you would earn a total of  103.00  from holding Montauk Renewables or generate 26.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.0%
Values	Daily Returns

Montauk Renewables  vs.  Sempra Energy

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Montauk Renewables is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Sempra Energy

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with Montauk Renewables and Sempra Energy

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

The idea behind Montauk Renewables and Sempra 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.

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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.