Correlation Between ENEL Societa and Engie SA

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

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

Diversification Opportunities for ENEL Societa and Engie SA

0.87

Correlation Coefficient

ENEL Societa  Engie SA

Very poor diversification

The 3 months correlation between ENEL and Engie is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ENEL Societa per and Engie SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie SA ADR and ENEL Societa 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 ENEL Societa per are associated (or correlated) with Engie SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie SA ADR has no effect on the direction of ENEL Societa i.e., ENEL Societa and Engie SA go up and down completely randomly.

Pair Corralation between ENEL Societa and Engie SA

Assuming the 90 days horizon ENEL Societa per is expected to generate 1.18 times more return on investment than Engie SA. However, ENEL Societa is 1.18 times more volatile than Engie SA ADR. It trades about -0.1 of its potential returns per unit of risk. Engie SA ADR is currently generating about -0.15 per unit of risk. If you would invest  783.00  in ENEL Societa per on September 12, 2024 and sell it today you would lose (56.00) from holding ENEL Societa per or give up 7.15% of portfolio value over 90 days.

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

ENEL Societa per  vs.  Engie SA ADR

ENEL Societa per

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENEL Societa per has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Engie SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engie SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with ENEL Societa and Engie SA

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

The idea behind ENEL Societa per and Engie SA ADR 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.