Correlation Between EON SE and RWE AG

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

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

Diversification Opportunities for EON SE and RWE AG

-0.13

Correlation Coefficient

EON SE  RWE AG

Good diversification

The 3 months correlation between EON and RWE is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding EON SE ADR and RWE AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG PK and EON SE 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 EON SE ADR 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 PK has no effect on the direction of EON SE i.e., EON SE and RWE AG go up and down completely randomly.

Pair Corralation between EON SE and RWE AG

If you would invest  1,060  in EON SE ADR on September 12, 2024 and sell it today you would earn a total of  0.00  from holding EON SE ADR or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

EON SE ADR  vs.  RWE AG PK

EON SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EON SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, EON SE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

RWE AG PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RWE AG PK 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.

Pair Trading with EON SE and RWE AG

The main advantage of trading using opposite EON SE and RWE AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EON SE 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 EON SE ADR and RWE AG PK 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..