Correlation Between Naturgy Energy and Enagas SA

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

By analyzing existing cross correlation between Naturgy Energy Group and Enagas SA, you can compare the effects of market volatilities on Naturgy Energy and Enagas SA 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 Naturgy Energy with a short position of Enagas SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naturgy Energy and Enagas SA.

Diversification Opportunities for Naturgy Energy and Enagas SA

0.91

Correlation Coefficient

Naturgy Energy  Enagas SA

Almost no diversification

The 3 months correlation between Naturgy and Enagas is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Naturgy Energy Group and Enagas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enagas SA and Naturgy Energy 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 Naturgy Energy Group are associated (or correlated) with Enagas SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enagas SA has no effect on the direction of Naturgy Energy i.e., Naturgy Energy and Enagas SA go up and down completely randomly.

Pair Corralation between Naturgy Energy and Enagas SA

Assuming the 90 days horizon Naturgy Energy is expected to generate 1.16 times less return on investment than Enagas SA. In addition to that, Naturgy Energy is 1.13 times more volatile than Enagas SA. It trades about 0.17 of its total potential returns per unit of risk. Enagas SA is currently generating about 0.22 per unit of volatility. If you would invest  601.00  in Enagas SA on December 29, 2024 and sell it today you would earn a total of  114.00  from holding Enagas SA or generate 18.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.39%
Values	Daily Returns

Naturgy Energy Group  vs.  Enagas SA

Naturgy Energy Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Naturgy Energy Group are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Naturgy Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Enagas SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enagas SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Enagas SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Naturgy Energy and Enagas SA

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

The idea behind Naturgy Energy Group and Enagas SA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.