Correlation Between Enagas SA and Guangdong Investment

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

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

Diversification Opportunities for Enagas SA and Guangdong Investment

0.03

Correlation Coefficient

Enagas SA  Guangdong Investment

Significant diversification

The 3 months correlation between Enagas and Guangdong is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Enagas SA and Guangdong Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment and Enagas SA 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 Enagas SA are associated (or correlated) with Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Enagas SA i.e., Enagas SA and Guangdong Investment go up and down completely randomly.

Pair Corralation between Enagas SA and Guangdong Investment

Assuming the 90 days horizon Enagas SA is expected to generate 0.42 times more return on investment than Guangdong Investment. However, Enagas SA is 2.38 times less risky than Guangdong Investment. It trades about 0.22 of its potential returns per unit of risk. Guangdong Investment is currently generating about 0.06 per unit of risk. If you would invest  601.00  in Enagas SA on December 30, 2024 and sell it today you would earn a total of  114.00  from holding Enagas SA or generate 18.97% return on investment over 90 days.

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

Enagas SA  vs.  Guangdong Investment

Enagas SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enagas SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Enagas SA showed solid returns over the last few months and may actually be approaching a breakup point.

Guangdong Investment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Guangdong Investment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Guangdong Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Enagas SA and Guangdong Investment

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

The idea behind Enagas SA and Guangdong Investment 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.