Correlation Between Enel SpA and ENGIE ADR/1

Can any of the company-specific risk be diversified away by investing in both Enel SpA and ENGIE ADR/1 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 Enel SpA and ENGIE ADR/1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enel SpA and ENGIE ADR1 EO, you can compare the effects of market volatilities on Enel SpA and ENGIE ADR/1 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 Enel SpA with a short position of ENGIE ADR/1. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enel SpA and ENGIE ADR/1.

Diversification Opportunities for Enel SpA and ENGIE ADR/1

0.64

Correlation Coefficient

Enel SpA  ENGIE ADR/1

Poor diversification

The 3 months correlation between Enel and ENGIE is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Enel SpA and ENGIE ADR1 EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGIE ADR1 EO and Enel SpA 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 Enel SpA are associated (or correlated) with ENGIE ADR/1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGIE ADR1 EO has no effect on the direction of Enel SpA i.e., Enel SpA and ENGIE ADR/1 go up and down completely randomly.

Pair Corralation between Enel SpA and ENGIE ADR/1

Assuming the 90 days horizon Enel SpA is expected to generate 1.36 times less return on investment than ENGIE ADR/1. But when comparing it to its historical volatility, Enel SpA is 1.08 times less risky than ENGIE ADR/1. It trades about 0.09 of its potential returns per unit of risk. ENGIE ADR1 EO is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,310  in ENGIE ADR1 EO on October 13, 2024 and sell it today you would earn a total of  250.00  from holding ENGIE ADR1 EO or generate 19.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.32%
Values	Daily Returns

Enel SpA  vs.  ENGIE ADR1 EO

Enel SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enel SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Enel SpA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

ENGIE ADR1 EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENGIE ADR1 EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, ENGIE ADR/1 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Enel SpA and ENGIE ADR/1

The main advantage of trading using opposite Enel SpA and ENGIE ADR/1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enel SpA position performs unexpectedly, ENGIE ADR/1 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 ENGIE ADR/1 will offset losses from the drop in ENGIE ADR/1's long position.

The idea behind Enel SpA and ENGIE ADR1 EO 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.