Correlation Between Otter Tail and Engie SA

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

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

Diversification Opportunities for Otter Tail and Engie SA

0.12

Correlation Coefficient

Otter Tail  Engie SA

Average diversification

The 3 months correlation between Otter and Engie is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Otter Tail 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 Otter Tail 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 Otter Tail 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 Otter Tail i.e., Otter Tail and Engie SA go up and down completely randomly.

Pair Corralation between Otter Tail and Engie SA

Given the investment horizon of 90 days Otter Tail is expected to under-perform the Engie SA. In addition to that, Otter Tail is 1.49 times more volatile than Engie SA ADR. It trades about -0.28 of its total potential returns per unit of risk. Engie SA ADR is currently generating about -0.01 per unit of volatility. If you would invest  1,614  in Engie SA ADR on October 8, 2024 and sell it today you would lose (5.00) from holding Engie SA ADR or give up 0.31% of portfolio value over 90 days.

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

Otter Tail  vs.  Engie SA ADR

Otter Tail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otter Tail has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Otter Tail is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

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 fairly strong forward indicators, Engie SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Otter Tail and Engie SA

The main advantage of trading using opposite Otter Tail and Engie SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Otter Tail 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 Otter Tail 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.