Correlation Between EON SE and Engie SA

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

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

Diversification Opportunities for EON SE and Engie SA

0.85

Correlation Coefficient

EON SE  Engie SA

Very poor diversification

The 3 months correlation between EON and Engie is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding EON SE 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 EON SE 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 EON SE 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 EON SE i.e., EON SE and Engie SA go up and down completely randomly.

Pair Corralation between EON SE and Engie SA

Assuming the 90 days horizon EON SE is expected to under-perform the Engie SA. In addition to that, EON SE is 2.31 times more volatile than Engie SA ADR. It trades about -0.02 of its total potential returns per unit of risk. Engie SA ADR is currently generating about 0.05 per unit of volatility. If you would invest  1,521  in Engie SA ADR on October 7, 2024 and sell it today you would earn a total of  88.00  from holding Engie SA ADR or generate 5.79% return on investment over 90 days.

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

EON SE  vs.  Engie SA ADR

EON SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EON SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing 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 fairly strong forward indicators, Engie SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with EON SE and Engie SA

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