Correlation Between Engie SA and AES Corp

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

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

Diversification Opportunities for Engie SA and AES Corp

0.12

Correlation Coefficient

Engie SA  AES Corp

Average diversification

The 3 months correlation between Engie and AES is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Engie SA and AES Corp Unit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp Unit 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 AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp Unit has no effect on the direction of Engie SA i.e., Engie SA and AES Corp go up and down completely randomly.

Pair Corralation between Engie SA and AES Corp

Assuming the 90 days horizon Engie SA is expected to generate 1.68 times more return on investment than AES Corp. However, Engie SA is 1.68 times more volatile than AES Corp Unit. It trades about 0.03 of its potential returns per unit of risk. AES Corp Unit is currently generating about -0.06 per unit of risk. If you would invest  1,241  in Engie SA on September 4, 2024 and sell it today you would earn a total of  305.00  from holding Engie SA or generate 24.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	30.71%
Values	Daily Returns

Engie SA  vs.  AES Corp Unit

Engie SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engie SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

AES Corp Unit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AES Corp Unit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, AES Corp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Engie SA and AES Corp

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

The idea behind Engie SA and AES Corp Unit 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.