Correlation Between Engie SA and Orange SA

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

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

Diversification Opportunities for Engie SA and Orange SA

0.88

Correlation Coefficient

Engie SA  Orange SA

Very poor diversification

The 3 months correlation between Engie and Orange is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Engie SA and Orange SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange SA and Engie 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 Engie SA are associated (or correlated) with Orange SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange SA has no effect on the direction of Engie SA i.e., Engie SA and Orange SA go up and down completely randomly.

Pair Corralation between Engie SA and Orange SA

Assuming the 90 days trading horizon Engie SA is expected to generate 1.21 times less return on investment than Orange SA. In addition to that, Engie SA is 1.42 times more volatile than Orange SA. It trades about 0.25 of its total potential returns per unit of risk. Orange SA is currently generating about 0.43 per unit of volatility. If you would invest  963.00  in Orange SA on December 30, 2024 and sell it today you would earn a total of  222.00  from holding Orange SA or generate 23.05% return on investment over 90 days.

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

Engie SA  vs.  Orange SA

Engie SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Engie SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Engie SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Orange SA

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Orange SA are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Orange SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Engie SA and Orange SA

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

The idea behind Engie SA and Orange SA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.