Correlation Between Sempra and RWE AG

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

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

Diversification Opportunities for Sempra and RWE AG

-0.54

Correlation Coefficient

Sempra  RWE AG

Excellent diversification

The 3 months correlation between Sempra and RWE is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Sempra and RWE AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG 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 are associated (or correlated) with RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG has no effect on the direction of Sempra i.e., Sempra and RWE AG go up and down completely randomly.

Pair Corralation between Sempra and RWE AG

Assuming the 90 days horizon Sempra is expected to generate 3.44 times less return on investment than RWE AG. But when comparing it to its historical volatility, Sempra is 1.16 times less risky than RWE AG. It trades about 0.06 of its potential returns per unit of risk. RWE AG is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,282  in RWE AG on April 25, 2025 and sell it today you would earn a total of  538.00  from holding RWE AG or generate 16.39% return on investment over 90 days.

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

Sempra  vs.  RWE AG

Sempra

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Sempra is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

RWE AG

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RWE AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, RWE AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sempra and RWE AG

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

The idea behind Sempra and RWE AG 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.