Correlation Between Sempra and National Grid

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

By analyzing existing cross correlation between Sempra and National Grid PLC, you can compare the effects of market volatilities on Sempra and National Grid 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 National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sempra and National Grid.

Diversification Opportunities for Sempra and National Grid

-0.15

Correlation Coefficient

Sempra  National Grid

Good diversification

The 3 months correlation between Sempra and National is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sempra and National Grid PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid PLC 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 National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid PLC has no effect on the direction of Sempra i.e., Sempra and National Grid go up and down completely randomly.

Pair Corralation between Sempra and National Grid

Assuming the 90 days horizon Sempra is expected to under-perform the National Grid. In addition to that, Sempra is 1.65 times more volatile than National Grid PLC. It trades about -0.11 of its total potential returns per unit of risk. National Grid PLC is currently generating about 0.03 per unit of volatility. If you would invest  1,140  in National Grid PLC on December 27, 2024 and sell it today you would earn a total of  30.00  from holding National Grid PLC or generate 2.63% return on investment over 90 days.

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

Sempra  vs.  National Grid PLC

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 uncertain 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.

National Grid PLC

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in National Grid PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, National Grid is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sempra and National Grid

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

The idea behind Sempra and National Grid PLC 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 Commodity Directory module to find actively traded commodities issued by global exchanges.