Correlation Between Compania and ENGIE Energia

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

By analyzing existing cross correlation between Compania de Minas and ENGIE Energia Peru, you can compare the effects of market volatilities on Compania and ENGIE Energia 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 Compania with a short position of ENGIE Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and ENGIE Energia.

Diversification Opportunities for Compania and ENGIE Energia

-0.28

Correlation Coefficient

Compania  ENGIE Energia

Very good diversification

The 3 months correlation between Compania and ENGIE is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Minas and ENGIE Energia Peru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGIE Energia Peru and Compania 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 Compania de Minas are associated (or correlated) with ENGIE Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGIE Energia Peru has no effect on the direction of Compania i.e., Compania and ENGIE Energia go up and down completely randomly.

Pair Corralation between Compania and ENGIE Energia

Assuming the 90 days trading horizon Compania de Minas is expected to under-perform the ENGIE Energia. In addition to that, Compania is 4.29 times more volatile than ENGIE Energia Peru. It trades about -0.05 of its total potential returns per unit of risk. ENGIE Energia Peru is currently generating about -0.19 per unit of volatility. If you would invest  410.00  in ENGIE Energia Peru on October 27, 2024 and sell it today you would lose (11.00) from holding ENGIE Energia Peru or give up 2.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.91%
Values	Daily Returns

Compania de Minas  vs.  ENGIE Energia Peru

Compania de Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Compania de Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

ENGIE Energia Peru

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENGIE Energia Peru has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, ENGIE Energia is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Compania and ENGIE Energia

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

The idea behind Compania de Minas and ENGIE Energia Peru 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.