Correlation Between Sempra Energy and MicroAlgo

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

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

Diversification Opportunities for Sempra Energy and MicroAlgo

-0.06

Correlation Coefficient

Sempra Energy  MicroAlgo

Good diversification

The 3 months correlation between Sempra and MicroAlgo is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sempra Energy and MicroAlgo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroAlgo 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 MicroAlgo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroAlgo has no effect on the direction of Sempra Energy i.e., Sempra Energy and MicroAlgo go up and down completely randomly.

Pair Corralation between Sempra Energy and MicroAlgo

Considering the 90-day investment horizon Sempra Energy is expected to generate 0.29 times more return on investment than MicroAlgo. However, Sempra Energy is 3.45 times less risky than MicroAlgo. It trades about 0.08 of its potential returns per unit of risk. MicroAlgo is currently generating about -0.66 per unit of risk. If you would invest  6,963  in Sempra Energy on January 24, 2024 and sell it today you would earn a total of  150.00  from holding Sempra Energy or generate 2.15% return on investment over 90 days.

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

Sempra Energy  vs.  MicroAlgo

Sempra Energy

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra Energy are ranked lower than 2 (%) 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.

MicroAlgo

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MicroAlgo are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, MicroAlgo displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sempra Energy and MicroAlgo

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

The idea behind Sempra Energy and MicroAlgo 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.