Correlation Between Engie SA and ENGIE ADR1

Can any of the company-specific risk be diversified away by investing in both Engie SA and ENGIE ADR1 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 Engie SA and ENGIE ADR1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Engie SA and ENGIE ADR1 EO, you can compare the effects of market volatilities on Engie SA and ENGIE ADR1 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 Engie SA with a short position of ENGIE ADR1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engie SA and ENGIE ADR1.

Diversification Opportunities for Engie SA and ENGIE ADR1

0.92

Correlation Coefficient

Engie SA  ENGIE ADR1

Almost no diversification

The 3 months correlation between Engie and ENGIE is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Engie SA and ENGIE ADR1 EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGIE ADR1 EO and Engie SA 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 Engie SA are associated (or correlated) with ENGIE ADR1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGIE ADR1 EO has no effect on the direction of Engie SA i.e., Engie SA and ENGIE ADR1 go up and down completely randomly.

Pair Corralation between Engie SA and ENGIE ADR1

Assuming the 90 days horizon Engie SA is expected to generate 1.1 times more return on investment than ENGIE ADR1. However, Engie SA is 1.1 times more volatile than ENGIE ADR1 EO. It trades about -0.09 of its potential returns per unit of risk. ENGIE ADR1 EO is currently generating about -0.11 per unit of risk. If you would invest  1,573  in Engie SA on September 22, 2024 and sell it today you would lose (93.00) from holding Engie SA or give up 5.91% of portfolio value over 90 days.

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

Engie SA  vs.  ENGIE ADR1 EO

Engie SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engie SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Engie SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ENGIE ADR1 EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENGIE ADR1 EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, ENGIE ADR1 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Engie SA and ENGIE ADR1

The main advantage of trading using opposite Engie SA and ENGIE ADR1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engie SA position performs unexpectedly, ENGIE ADR1 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 ADR1 will offset losses from the drop in ENGIE ADR1's long position.

The idea behind Engie SA and ENGIE ADR1 EO 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 Stocks Directory module to find actively traded stocks across global markets.