Correlation Between InRetail Peru and ENGIE Energia

Can any of the company-specific risk be diversified away by investing in both InRetail Peru and ENGIE Energia 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 InRetail Peru and ENGIE Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between InRetail Peru Corp and ENGIE Energia Peru, you can compare the effects of market volatilities on InRetail Peru and ENGIE Energia 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 InRetail Peru with a short position of ENGIE Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of InRetail Peru and ENGIE Energia.

Diversification Opportunities for InRetail Peru and ENGIE Energia

0.23

Correlation Coefficient

InRetail Peru  ENGIE Energia

Modest diversification

The 3 months correlation between InRetail and ENGIE is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding InRetail Peru Corp and ENGIE Energia Peru in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGIE Energia Peru and InRetail Peru 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 InRetail Peru Corp are associated (or correlated) with ENGIE Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGIE Energia Peru has no effect on the direction of InRetail Peru i.e., InRetail Peru and ENGIE Energia go up and down completely randomly.

Pair Corralation between InRetail Peru and ENGIE Energia

Assuming the 90 days trading horizon InRetail Peru Corp is expected to generate 0.94 times more return on investment than ENGIE Energia. However, InRetail Peru Corp is 1.06 times less risky than ENGIE Energia. It trades about -0.05 of its potential returns per unit of risk. ENGIE Energia Peru is currently generating about -0.19 per unit of risk. If you would invest  3,130  in InRetail Peru Corp on October 27, 2024 and sell it today you would lose (20.00) from holding InRetail Peru Corp or give up 0.64% of portfolio value over 90 days.

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

InRetail Peru Corp  vs.  ENGIE Energia Peru

InRetail Peru Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InRetail Peru Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, InRetail Peru is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

ENGIE Energia Peru

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENGIE Energia Peru has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, ENGIE Energia is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with InRetail Peru and ENGIE Energia

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

The idea behind InRetail Peru Corp and ENGIE Energia Peru 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.