Correlation Between Sphere Entertainment and Cheniere Energy

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

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

Diversification Opportunities for Sphere Entertainment and Cheniere Energy

-0.6

Correlation Coefficient

Sphere Entertainment  Cheniere Energy

Excellent diversification

The 3 months correlation between Sphere and Cheniere is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sphere Entertainment Co and Cheniere Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy Partners and Sphere Entertainment 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 Sphere Entertainment Co are associated (or correlated) with Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy Partners has no effect on the direction of Sphere Entertainment i.e., Sphere Entertainment and Cheniere Energy go up and down completely randomly.

Pair Corralation between Sphere Entertainment and Cheniere Energy

Given the investment horizon of 90 days Sphere Entertainment Co is expected to under-perform the Cheniere Energy. In addition to that, Sphere Entertainment is 1.22 times more volatile than Cheniere Energy Partners. It trades about -0.04 of its total potential returns per unit of risk. Cheniere Energy Partners is currently generating about 0.24 per unit of volatility. If you would invest  4,847  in Cheniere Energy Partners on October 23, 2024 and sell it today you would earn a total of  1,367  from holding Cheniere Energy Partners or generate 28.2% return on investment over 90 days.

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

Sphere Entertainment Co  vs.  Cheniere Energy Partners

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Cheniere Energy Partners

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sphere Entertainment and Cheniere Energy

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

The idea behind Sphere Entertainment Co and Cheniere Energy Partners 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.