Correlation Between NorthWestern and Engie SA

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

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

Diversification Opportunities for NorthWestern and Engie SA

0.61

Correlation Coefficient

NorthWestern  Engie SA

Poor diversification

The 3 months correlation between NorthWestern and Engie is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding NorthWestern and Engie SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie SA ADR and NorthWestern 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 NorthWestern are associated (or correlated) with Engie SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie SA ADR has no effect on the direction of NorthWestern i.e., NorthWestern and Engie SA go up and down completely randomly.

Pair Corralation between NorthWestern and Engie SA

Considering the 90-day investment horizon NorthWestern is expected to generate 1.26 times more return on investment than Engie SA. However, NorthWestern is 1.26 times more volatile than Engie SA ADR. It trades about 0.07 of its potential returns per unit of risk. Engie SA ADR is currently generating about 0.06 per unit of risk. If you would invest  4,800  in NorthWestern on September 29, 2024 and sell it today you would earn a total of  545.00  from holding NorthWestern or generate 11.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.21%
Values	Daily Returns

NorthWestern  vs.  Engie SA ADR

NorthWestern

Risk-Adjusted Performance

0 of 100

Very Weak

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

Engie SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NorthWestern and Engie SA

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

The idea behind NorthWestern and Engie SA ADR 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.

Check out your portfolio center.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.