Correlation Between Engie SA and Canadian Utilities

Can any of the company-specific risk be diversified away by investing in both Engie SA and Canadian Utilities 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 Canadian Utilities 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 Canadian Utilities Limited, you can compare the effects of market volatilities on Engie SA and Canadian Utilities 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 Canadian Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engie SA and Canadian Utilities.

Diversification Opportunities for Engie SA and Canadian Utilities

0.82

Correlation Coefficient

Engie SA  Canadian Utilities

Very poor diversification

The 3 months correlation between Engie and Canadian is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Engie SA ADR and Canadian Utilities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Canadian Utilities 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 Canadian Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Canadian Utilities has no effect on the direction of Engie SA i.e., Engie SA and Canadian Utilities go up and down completely randomly.

Pair Corralation between Engie SA and Canadian Utilities

Assuming the 90 days horizon Engie SA ADR is expected to generate 1.23 times more return on investment than Canadian Utilities. However, Engie SA is 1.23 times more volatile than Canadian Utilities Limited. It trades about 0.3 of its potential returns per unit of risk. Canadian Utilities Limited is currently generating about 0.12 per unit of risk. 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

Engie SA ADR  vs.  Canadian Utilities Limited

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.

Canadian Utilities

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Canadian Utilities Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Canadian Utilities may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Engie SA and Canadian Utilities

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

The idea behind Engie SA ADR and Canadian Utilities Limited 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.