Correlation Between Engie SA and Enel SpA

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

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

Diversification Opportunities for Engie SA and Enel SpA

0.5

Correlation Coefficient

Engie SA  Enel SpA

Very weak diversification

The 3 months correlation between Engie and Enel is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Engie SA and Enel SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel SpA 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 Enel SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel SpA has no effect on the direction of Engie SA i.e., Engie SA and Enel SpA go up and down completely randomly.

Pair Corralation between Engie SA and Enel SpA

Assuming the 90 days horizon Engie SA is expected to under-perform the Enel SpA. But the stock apears to be less risky and, when comparing its historical volatility, Engie SA is 1.6 times less risky than Enel SpA. The stock trades about -0.04 of its potential returns per unit of risk. The Enel SpA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  690.00  in Enel SpA on September 28, 2024 and sell it today you would lose (15.00) from holding Enel SpA or give up 2.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Engie SA  vs.  Enel SpA

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 nearly stable basic indicators, Engie SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 essential indicators, Enel SpA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Engie SA and Enel SpA

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

The idea behind Engie SA and Enel SpA 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.