Correlation Between Carnegie Clean and Sempra

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

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

Diversification Opportunities for Carnegie Clean and Sempra

0.6

Correlation Coefficient

Carnegie Clean  Sempra

Poor diversification

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

Pair Corralation between Carnegie Clean and Sempra

Assuming the 90 days trading horizon Carnegie Clean is expected to generate 2.06 times less return on investment than Sempra. In addition to that, Carnegie Clean is 1.58 times more volatile than Sempra. It trades about 0.05 of its total potential returns per unit of risk. Sempra is currently generating about 0.15 per unit of volatility. If you would invest  7,321  in Sempra on September 15, 2024 and sell it today you would earn a total of  1,229  from holding Sempra or generate 16.79% return on investment over 90 days.

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

Carnegie Clean Energy  vs.  Sempra

Carnegie Clean Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Carnegie Clean Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, Carnegie Clean may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sempra

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Carnegie Clean and Sempra

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

The idea behind Carnegie Clean Energy and Sempra 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.