Correlation Between Sempra Energy and Avista

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

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

Diversification Opportunities for Sempra Energy and Avista

0.19

Correlation Coefficient

Sempra Energy  Avista

Average diversification

The 3 months correlation between Sempra and Avista is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sempra Energy and Avista in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avista 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 Avista. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avista has no effect on the direction of Sempra Energy i.e., Sempra Energy and Avista go up and down completely randomly.

Pair Corralation between Sempra Energy and Avista

Considering the 90-day investment horizon Sempra Energy is expected to generate 1.23 times more return on investment than Avista. However, Sempra Energy is 1.23 times more volatile than Avista. It trades about 0.17 of its potential returns per unit of risk. Avista is currently generating about 0.01 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 Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sempra Energy  vs.  Avista

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.

Avista

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Avista has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Avista is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sempra Energy and Avista

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

The idea behind Sempra Energy and Avista 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..