Correlation Between Iron Road and ENGIE Eps

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

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

Diversification Opportunities for Iron Road and ENGIE Eps

-0.34

Correlation Coefficient

Iron Road  ENGIE Eps

Very good diversification

The 3 months correlation between Iron and ENGIE is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Iron Road Limited and ENGIE Eps SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGIE Eps SA and Iron Road 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 Iron Road Limited are associated (or correlated) with ENGIE Eps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGIE Eps SA has no effect on the direction of Iron Road i.e., Iron Road and ENGIE Eps go up and down completely randomly.

Pair Corralation between Iron Road and ENGIE Eps

Assuming the 90 days horizon Iron Road Limited is expected to under-perform the ENGIE Eps. In addition to that, Iron Road is 2.86 times more volatile than ENGIE Eps SA. It trades about -0.02 of its total potential returns per unit of risk. ENGIE Eps SA is currently generating about 0.13 per unit of volatility. If you would invest  102.00  in ENGIE Eps SA on September 27, 2024 and sell it today you would earn a total of  18.00  from holding ENGIE Eps SA or generate 17.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Iron Road Limited  vs.  ENGIE Eps SA

Iron Road Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iron Road Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

ENGIE Eps SA

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days ENGIE Eps SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, ENGIE Eps reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iron Road and ENGIE Eps

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

The idea behind Iron Road Limited and ENGIE Eps 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.

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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.