Correlation Between AES Corp and Engie SA

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

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

Diversification Opportunities for AES Corp and Engie SA

0.0

Correlation Coefficient

AES Corp  Engie SA

Pay attention - limited upside

The 3 months correlation between AES and Engie is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding AES Corp Unit and Engie SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie SA ADR and AES Corp 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 AES Corp Unit are associated (or correlated) with Engie SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie SA ADR has no effect on the direction of AES Corp i.e., AES Corp and Engie SA go up and down completely randomly.

Pair Corralation between AES Corp and Engie SA

If you would invest  1,586  in Engie SA ADR on December 28, 2024 and sell it today you would earn a total of  350.00  from holding Engie SA ADR or generate 22.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

AES Corp Unit  vs.  Engie SA ADR

AES Corp Unit

Risk-Adjusted Performance

Very Weak

Over the last 90 days AES Corp Unit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AES Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Engie SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Engie SA ADR are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Engie SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AES Corp and Engie SA

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

The idea behind AES Corp Unit and Engie SA ADR 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.