Correlation Between Sempra Energy and Ares Commercial

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

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

Diversification Opportunities for Sempra Energy and Ares Commercial

0.26

Correlation Coefficient

Sempra Energy  Ares Commercial

Modest diversification

The 3 months correlation between Sempra and Ares is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Sempra Energy and Ares Commercial Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ares Commercial Real 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 Ares Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ares Commercial Real has no effect on the direction of Sempra Energy i.e., Sempra Energy and Ares Commercial go up and down completely randomly.

Pair Corralation between Sempra Energy and Ares Commercial

Considering the 90-day investment horizon Sempra Energy is expected to generate 0.67 times more return on investment than Ares Commercial. However, Sempra Energy is 1.48 times less risky than Ares Commercial. It trades about 0.12 of its potential returns per unit of risk. Ares Commercial Real is currently generating about -0.17 per unit of risk. If you would invest  6,963  in Sempra Energy on January 25, 2024 and sell it today you would earn a total of  241.00  from holding Sempra Energy or generate 3.46% return on investment over 90 days.

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

Sempra Energy  vs.  Ares Commercial Real

Sempra Energy

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sempra Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ares Commercial Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ares Commercial Real has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sempra Energy and Ares Commercial

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

The idea behind Sempra Energy and Ares Commercial Real 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.