Correlation Between ENGIE Eps and American Airlines

Can any of the company-specific risk be diversified away by investing in both ENGIE Eps and American Airlines 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 American Airlines 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 American Airlines Group, you can compare the effects of market volatilities on ENGIE Eps and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENGIE Eps and American Airlines.

Diversification Opportunities for ENGIE Eps and American Airlines

0.75

Correlation Coefficient

ENGIE Eps  American Airlines

Poor diversification

The 3 months correlation between ENGIE and American is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding ENGIE Eps SA and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of ENGIE Eps i.e., ENGIE Eps and American Airlines go up and down completely randomly.

Pair Corralation between ENGIE Eps and American Airlines

Assuming the 90 days horizon ENGIE Eps SA is expected to generate 2.47 times more return on investment than American Airlines. However, ENGIE Eps is 2.47 times more volatile than American Airlines Group. It trades about 0.07 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.05 per unit of risk. If you would invest  55.00  in ENGIE Eps SA on October 3, 2024 and sell it today you would earn a total of  65.00  from holding ENGIE Eps SA or generate 118.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.91%
Values	Daily Returns

ENGIE Eps SA  vs.  American Airlines Group

ENGIE Eps SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

American Airlines

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Airlines Group are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, American Airlines reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ENGIE Eps and American Airlines

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

The idea behind ENGIE Eps SA and American Airlines Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.