Correlation Between Encavis AG and Neoen SA

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

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

Diversification Opportunities for Encavis AG and Neoen SA

0.0

Correlation Coefficient

Encavis AG  Neoen SA

Pay attention - limited upside

The 3 months correlation between Encavis and Neoen is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Encavis AG and Neoen SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neoen SA and Encavis AG 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 Encavis AG are associated (or correlated) with Neoen SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neoen SA has no effect on the direction of Encavis AG i.e., Encavis AG and Neoen SA go up and down completely randomly.

Pair Corralation between Encavis AG and Neoen SA

Assuming the 90 days horizon Encavis AG is expected to generate 1.0 times less return on investment than Neoen SA. But when comparing it to its historical volatility, Encavis AG is 1.23 times less risky than Neoen SA. It trades about 0.08 of its potential returns per unit of risk. Neoen SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,846  in Neoen SA on September 13, 2024 and sell it today you would earn a total of  66.00  from holding Neoen SA or generate 1.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Encavis AG  vs.  Neoen SA

Encavis AG

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Encavis AG are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Encavis AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Neoen SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Neoen SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Neoen SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Encavis AG and Neoen SA

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

The idea behind Encavis AG and Neoen SA 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .