Correlation Between ENGIE Eps and Aon PLC

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

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

Diversification Opportunities for ENGIE Eps and Aon PLC

0.83

Correlation Coefficient

ENGIE Eps  Aon PLC

Very poor diversification

The 3 months correlation between ENGIE and Aon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding ENGIE Eps SA and Aon PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aon PLC and ENGIE Eps 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 Eps SA are associated (or correlated) with Aon PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aon PLC has no effect on the direction of ENGIE Eps i.e., ENGIE Eps and Aon PLC go up and down completely randomly.

Pair Corralation between ENGIE Eps and Aon PLC

Assuming the 90 days horizon ENGIE Eps SA is expected to under-perform the Aon PLC. But the stock apears to be less risky and, when comparing its historical volatility, ENGIE Eps SA is 2.16 times less risky than Aon PLC. The stock trades about -0.04 of its potential returns per unit of risk. The Aon PLC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  34,551  in Aon PLC on September 27, 2024 and sell it today you would lose (301.00) from holding Aon PLC or give up 0.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	78.57%
Values	Daily Returns

ENGIE Eps SA  vs.  Aon PLC

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.

Aon PLC

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aon PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aon PLC may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ENGIE Eps and Aon PLC

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

The idea behind ENGIE Eps SA and Aon PLC 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.