Correlation Between Sempra and ENGIE ADR/1

Can any of the company-specific risk be diversified away by investing in both Sempra and ENGIE ADR/1 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 ENGIE ADR/1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sempra and ENGIE ADR1 EO, you can compare the effects of market volatilities on Sempra and ENGIE ADR/1 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 ENGIE ADR/1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sempra and ENGIE ADR/1.

Diversification Opportunities for Sempra and ENGIE ADR/1

-0.51

Correlation Coefficient

Sempra  ENGIE ADR/1

Excellent diversification

The 3 months correlation between Sempra and ENGIE is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sempra and ENGIE ADR1 EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGIE ADR1 EO 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 ENGIE ADR/1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGIE ADR1 EO has no effect on the direction of Sempra i.e., Sempra and ENGIE ADR/1 go up and down completely randomly.

Pair Corralation between Sempra and ENGIE ADR/1

Assuming the 90 days horizon Sempra is expected to generate 1.32 times more return on investment than ENGIE ADR/1. However, Sempra is 1.32 times more volatile than ENGIE ADR1 EO. It trades about 0.09 of its potential returns per unit of risk. ENGIE ADR1 EO is currently generating about 0.12 per unit of risk. 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

Sempra  vs.  ENGIE ADR1 EO

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.

ENGIE ADR1 EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENGIE ADR1 EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, ENGIE ADR/1 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sempra and ENGIE ADR/1

The main advantage of trading using opposite Sempra and ENGIE ADR/1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sempra position performs unexpectedly, ENGIE ADR/1 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 ENGIE ADR/1 will offset losses from the drop in ENGIE ADR/1's long position.

The idea behind Sempra and ENGIE ADR1 EO 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 Transaction History module to view history of all your transactions and understand their impact on performance.