Correlation Between Sempra and Enel SpA

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

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

Diversification Opportunities for Sempra and Enel SpA

-0.64

Correlation Coefficient

Sempra  Enel SpA

Excellent diversification

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

Pair Corralation between Sempra and Enel SpA

Assuming the 90 days horizon Sempra is expected to generate 1.01 times more return on investment than Enel SpA. However, Sempra is 1.01 times more volatile than Enel SpA. It trades about 0.12 of its potential returns per unit of risk. Enel SpA is currently generating about 0.0 per unit of risk. If you would invest  7,297  in Sempra on September 22, 2024 and sell it today you would earn a total of  929.00  from holding Sempra or generate 12.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Sempra  vs.  Enel SpA

Sempra

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sempra may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Enel SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enel SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Enel SpA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sempra and Enel SpA

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

The idea behind Sempra and Enel SpA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.