Correlation Between Companhia Energetica and Engie SA

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

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

Diversification Opportunities for Companhia Energetica and Engie SA

0.53

Correlation Coefficient

Companhia Energetica  Engie SA

Very weak diversification

The 3 months correlation between Companhia and Engie is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energetica de 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 Companhia Energetica 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 Companhia Energetica de 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 Companhia Energetica i.e., Companhia Energetica and Engie SA go up and down completely randomly.

Pair Corralation between Companhia Energetica and Engie SA

Considering the 90-day investment horizon Companhia Energetica de is expected to generate 2.13 times more return on investment than Engie SA. However, Companhia Energetica is 2.13 times more volatile than Engie SA ADR. It trades about 0.04 of its potential returns per unit of risk. Engie SA ADR is currently generating about 0.06 per unit of risk. If you would invest  167.00  in Companhia Energetica de on September 29, 2024 and sell it today you would earn a total of  13.00  from holding Companhia Energetica de or generate 7.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

Companhia Energetica de  vs.  Engie SA ADR

Companhia Energetica

Risk-Adjusted Performance

0 of 100

Very Weak

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

Engie SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engie SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Companhia Energetica and Engie SA

The main advantage of trading using opposite Companhia Energetica and Engie SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Energetica 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 Companhia Energetica de 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.