Correlation Between Public Service and Sempra Energy

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

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

Diversification Opportunities for Public Service and Sempra Energy

0.64

Correlation Coefficient

Public Service  Sempra Energy

Poor diversification

The 3 months correlation between Public and Sempra is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Public Service Enterprise and Sempra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempra Energy and Public Service 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 Public Service Enterprise 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 Public Service i.e., Public Service and Sempra Energy go up and down completely randomly.

Pair Corralation between Public Service and Sempra Energy

Considering the 90-day investment horizon Public Service Enterprise is expected to generate 0.96 times more return on investment than Sempra Energy. However, Public Service Enterprise is 1.05 times less risky than Sempra Energy. It trades about 0.21 of its potential returns per unit of risk. Sempra Energy is currently generating about 0.12 per unit of risk. If you would invest  7,773  in Public Service Enterprise on May 5, 2025 and sell it today you would earn a total of  1,124  from holding Public Service Enterprise or generate 14.46% return on investment over 90 days.

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

Public Service Enterprise  vs.  Sempra Energy

Public Service Enterprise

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Public Service Enterprise are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Public Service reported solid returns over the last few months and may actually be approaching a breakup point.

Sempra Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Sempra Energy may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Public Service and Sempra Energy

The main advantage of trading using opposite Public Service and Sempra Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Service 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 Public Service Enterprise 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.