Correlation Between Consumers Energy and Engie SA

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

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

Diversification Opportunities for Consumers Energy and Engie SA

0.82

Correlation Coefficient

Consumers Energy  Engie SA

Very poor diversification

The 3 months correlation between Consumers and Engie is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy 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 Consumers Energy 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 Consumers Energy 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 Consumers Energy i.e., Consumers Energy and Engie SA go up and down completely randomly.

Pair Corralation between Consumers Energy and Engie SA

Assuming the 90 days trading horizon Consumers Energy is expected to generate 4.11 times less return on investment than Engie SA. In addition to that, Consumers Energy is 1.24 times more volatile than Engie SA ADR. It trades about 0.06 of its total potential returns per unit of risk. Engie SA ADR is currently generating about 0.3 per unit of volatility. If you would invest  1,586  in Engie SA ADR on December 30, 2024 and sell it today you would earn a total of  371.00  from holding Engie SA ADR or generate 23.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Consumers Energy  vs.  Engie SA ADR

Consumers Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Consumers Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Consumers Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 Consumers Energy and Engie SA

The main advantage of trading using opposite Consumers Energy and Engie SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumers Energy 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 Consumers Energy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.