Correlation Between Gap, and SEMPRA

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

By analyzing existing cross correlation between The Gap, and SEMPRA ENERGY 325, you can compare the effects of market volatilities on Gap, 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 Gap, with a short position of SEMPRA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gap, and SEMPRA.

Diversification Opportunities for Gap, and SEMPRA

-0.78

Correlation Coefficient

Gap,  SEMPRA

Pay attention - limited upside

The 3 months correlation between Gap, and SEMPRA is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding The Gap, and SEMPRA ENERGY 325 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEMPRA ENERGY 325 and Gap, 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 The Gap, 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 ENERGY 325 has no effect on the direction of Gap, i.e., Gap, and SEMPRA go up and down completely randomly.

Pair Corralation between Gap, and SEMPRA

Considering the 90-day investment horizon The Gap, is expected to generate 5.43 times more return on investment than SEMPRA. However, Gap, is 5.43 times more volatile than SEMPRA ENERGY 325. It trades about 0.09 of its potential returns per unit of risk. SEMPRA ENERGY 325 is currently generating about -0.13 per unit of risk. If you would invest  2,220  in The Gap, on September 4, 2024 and sell it today you would earn a total of  361.00  from holding The Gap, or generate 16.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	85.94%
Values	Daily Returns

The Gap,  vs.  SEMPRA ENERGY 325

Gap,

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Gap, are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Gap, reported solid returns over the last few months and may actually be approaching a breakup point.

SEMPRA ENERGY 325

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEMPRA ENERGY 325 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, SEMPRA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Gap, and SEMPRA

The main advantage of trading using opposite Gap, and SEMPRA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gap, 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 The Gap, and SEMPRA ENERGY 325 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.