Correlation Between Sempra Energy and AuraSource

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

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

Diversification Opportunities for Sempra Energy and AuraSource

-0.64

Correlation Coefficient

Sempra Energy  AuraSource

Excellent diversification

The 3 months correlation between Sempra and AuraSource is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Sempra Energy and AuraSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AuraSource 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 AuraSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AuraSource has no effect on the direction of Sempra Energy i.e., Sempra Energy and AuraSource go up and down completely randomly.

Pair Corralation between Sempra Energy and AuraSource

Considering the 90-day investment horizon Sempra Energy is expected to generate 0.08 times more return on investment than AuraSource. However, Sempra Energy is 12.87 times less risky than AuraSource. It trades about 0.17 of its potential returns per unit of risk. AuraSource is currently generating about -0.18 per unit of risk. If you would invest  8,201  in Sempra Energy on August 31, 2024 and sell it today you would earn a total of  1,227  from holding Sempra Energy or generate 14.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Sempra Energy  vs.  AuraSource

Sempra Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra Energy are ranked lower than 13 (%) 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.

AuraSource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AuraSource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Sempra Energy and AuraSource

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

The idea behind Sempra Energy and AuraSource 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.