Correlation Between Engie SA and Allete

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

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

Diversification Opportunities for Engie SA and Allete

-0.83

Correlation Coefficient

Engie SA  Allete

Pay attention - limited upside

The 3 months correlation between Engie and Allete is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Engie SA ADR and Allete Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allete Inc 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 ADR are associated (or correlated) with Allete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allete Inc has no effect on the direction of Engie SA i.e., Engie SA and Allete go up and down completely randomly.

Pair Corralation between Engie SA and Allete

Assuming the 90 days horizon Engie SA ADR is expected to generate 2.73 times more return on investment than Allete. However, Engie SA is 2.73 times more volatile than Allete Inc. It trades about 0.06 of its potential returns per unit of risk. Allete Inc is currently generating about 0.13 per unit of risk. If you would invest  1,467  in Engie SA ADR on September 29, 2024 and sell it today you would earn a total of  106.00  from holding Engie SA ADR or generate 7.23% return on investment over 90 days.

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

Engie SA ADR  vs.  Allete Inc

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.

Allete Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Allete Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, Allete is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Engie SA and Allete

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

The idea behind Engie SA ADR and Allete Inc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.