Correlation Between Engie SA and EON SE

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

Diversification Opportunities for Engie SA and EON SE

0.9

Correlation Coefficient

Engie SA  EON SE

Almost no diversification

The 3 months correlation between Engie and EON is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Engie SA ADR and EON SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EON SE 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 EON SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EON SE has no effect on the direction of Engie SA i.e., Engie SA and EON SE go up and down completely randomly.

Pair Corralation between Engie SA and EON SE

Assuming the 90 days horizon Engie SA is expected to generate 1.62 times less return on investment than EON SE. But when comparing it to its historical volatility, Engie SA ADR is 2.56 times less risky than EON SE. It trades about 0.05 of its potential returns per unit of risk. EON SE is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  966.00  in EON SE on September 27, 2024 and sell it today you would earn a total of  213.00  from holding EON SE or generate 22.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	75.84%
Values	Daily Returns

Engie SA ADR  vs.  EON SE

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.

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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Engie SA and EON SE

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

The idea behind Engie SA ADR and EON SE 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.