Correlation Between SEMPRA and Sphere Entertainment

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

By analyzing existing cross correlation between SEMPRA ENERGY 325 and Sphere Entertainment Co, you can compare the effects of market volatilities on SEMPRA and Sphere Entertainment 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 Sphere Entertainment. Check out your portfolio center. Please also check ongoing floating volatility patterns of SEMPRA and Sphere Entertainment.

Diversification Opportunities for SEMPRA and Sphere Entertainment

0.04

Correlation Coefficient

SEMPRA  Sphere Entertainment

Significant diversification

The 3 months correlation between SEMPRA and Sphere is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding SEMPRA ENERGY 325 and Sphere Entertainment Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sphere Entertainment 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 ENERGY 325 are associated (or correlated) with Sphere Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sphere Entertainment has no effect on the direction of SEMPRA i.e., SEMPRA and Sphere Entertainment go up and down completely randomly.

Pair Corralation between SEMPRA and Sphere Entertainment

Assuming the 90 days trading horizon SEMPRA ENERGY 325 is expected to generate 0.19 times more return on investment than Sphere Entertainment. However, SEMPRA ENERGY 325 is 5.26 times less risky than Sphere Entertainment. It trades about -0.13 of its potential returns per unit of risk. Sphere Entertainment Co is currently generating about -0.03 per unit of risk. If you would invest  9,693  in SEMPRA ENERGY 325 on September 4, 2024 and sell it today you would lose (390.00) from holding SEMPRA ENERGY 325 or give up 4.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.3%
Values	Daily Returns

SEMPRA ENERGY 325  vs.  Sphere Entertainment Co

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.

Sphere Entertainment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sphere Entertainment Co has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical indicators, Sphere Entertainment is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with SEMPRA and Sphere Entertainment

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

The idea behind SEMPRA ENERGY 325 and Sphere Entertainment Co 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.