Correlation Between Sempra Energy and PPL
Can any of the company-specific risk be diversified away by investing in both Sempra Energy and PPL 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 PPL into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sempra Energy and PPL Corporation, you can compare the effects of market volatilities on Sempra Energy and PPL 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 PPL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sempra Energy and PPL.
Diversification Opportunities for Sempra Energy and PPL
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sempra and PPL is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Sempra Energy and PPL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PPL Corporation 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 PPL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PPL Corporation has no effect on the direction of Sempra Energy i.e., Sempra Energy and PPL go up and down completely randomly.
Pair Corralation between Sempra Energy and PPL
Considering the 90-day investment horizon Sempra Energy is expected to generate 2.39 times less return on investment than PPL. But when comparing it to its historical volatility, Sempra Energy is 1.02 times less risky than PPL. It trades about 0.08 of its potential returns per unit of risk. PPL Corporation is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2,618 in PPL Corporation on December 29, 2023 and sell it today you would earn a total of 124.00 from holding PPL Corporation or generate 4.74% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 95.65% |
Values | Daily Returns |
Sempra Energy vs. PPL Corp.
Performance |
Timeline |
Sempra Energy |
PPL Corporation |
Sempra Energy and PPL Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Sempra Energy and PPL
The main advantage of trading using opposite Sempra Energy and PPL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sempra Energy position performs unexpectedly, PPL 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 PPL will offset losses from the drop in PPL's long position.Sempra Energy vs. Montauk Renewables | Sempra Energy vs. Companhia Paranaense De | Sempra Energy vs. The AES | Sempra Energy vs. Allete Inc |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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