Correlation Between Sempra Energy and AES

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

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

Diversification Opportunities for Sempra Energy and AES

-0.8

Correlation Coefficient

Sempra Energy  AES

Pay attention - limited upside

The 3 months correlation between Sempra and AES is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Sempra Energy and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES and Sempra Energy 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 Energy are associated (or correlated) with AES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES has no effect on the direction of Sempra Energy i.e., Sempra Energy and AES go up and down completely randomly.

Pair Corralation between Sempra Energy and AES

Considering the 90-day investment horizon Sempra Energy is expected to generate 0.5 times more return on investment than AES. However, Sempra Energy is 2.0 times less risky than AES. It trades about 0.16 of its potential returns per unit of risk. The AES is currently generating about -0.12 per unit of risk. If you would invest  8,201  in Sempra Energy on September 2, 2024 and sell it today you would earn a total of  1,166  from holding Sempra Energy or generate 14.22% return on investment over 90 days.

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

Sempra Energy  vs.  The AES

Sempra Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Sempra Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

AES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The AES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sempra Energy and AES

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

The idea behind Sempra Energy and The AES 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.