Correlation Between Sempra Energy and RWE AG

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

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

Diversification Opportunities for Sempra Energy and RWE AG

-0.82

Correlation Coefficient

Sempra Energy  RWE AG

Pay attention - limited upside

The 3 months correlation between Sempra and RWE is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Sempra Energy and RWE AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG PK 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 RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG PK has no effect on the direction of Sempra Energy i.e., Sempra Energy and RWE AG go up and down completely randomly.

Pair Corralation between Sempra Energy and RWE AG

Considering the 90-day investment horizon Sempra Energy is expected to under-perform the RWE AG. In addition to that, Sempra Energy is 1.78 times more volatile than RWE AG PK. It trades about -0.1 of its total potential returns per unit of risk. RWE AG PK is currently generating about 0.18 per unit of volatility. If you would invest  2,964  in RWE AG PK on December 27, 2024 and sell it today you would earn a total of  573.00  from holding RWE AG PK or generate 19.33% 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.  RWE AG PK

Sempra Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sempra Energy 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 basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

RWE AG PK

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RWE AG PK are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, RWE AG showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sempra Energy and RWE AG

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

The idea behind Sempra Energy and RWE AG PK 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.