Correlation Between MicroAlgo and Sempra Energy

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

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

Diversification Opportunities for MicroAlgo and Sempra Energy

0.14

Correlation Coefficient

MicroAlgo  Sempra Energy

Average diversification

The 3 months correlation between MicroAlgo and Sempra is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding MicroAlgo and Sempra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempra Energy and MicroAlgo 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 MicroAlgo are associated (or correlated) with Sempra Energy. 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 has no effect on the direction of MicroAlgo i.e., MicroAlgo and Sempra Energy go up and down completely randomly.

Pair Corralation between MicroAlgo and Sempra Energy

Given the investment horizon of 90 days MicroAlgo is expected to generate 76.09 times more return on investment than Sempra Energy. However, MicroAlgo is 76.09 times more volatile than Sempra Energy. It trades about 0.09 of its potential returns per unit of risk. Sempra Energy is currently generating about 0.04 per unit of risk. If you would invest  169.00  in MicroAlgo on February 13, 2024 and sell it today you would earn a total of  63.00  from holding MicroAlgo or generate 37.28% return on investment over 90 days.

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

MicroAlgo  vs.  Sempra Energy

MicroAlgo

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MicroAlgo are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, MicroAlgo displayed solid returns over the last few months and may actually be approaching a breakup point.

Sempra Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Sempra Energy may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with MicroAlgo and Sempra Energy

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

The idea behind MicroAlgo and Sempra Energy 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.