Correlation Between US FOODS and ENGIE Eps

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

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

Diversification Opportunities for US FOODS and ENGIE Eps

0.72

Correlation Coefficient

US FOODS  ENGIE Eps

Poor diversification

The 3 months correlation between UFH and ENGIE is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding US FOODS HOLDING and ENGIE Eps SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENGIE Eps SA and US FOODS 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 US FOODS HOLDING are associated (or correlated) with ENGIE Eps. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENGIE Eps SA has no effect on the direction of US FOODS i.e., US FOODS and ENGIE Eps go up and down completely randomly.

Pair Corralation between US FOODS and ENGIE Eps

Assuming the 90 days trading horizon US FOODS HOLDING is expected to generate 0.84 times more return on investment than ENGIE Eps. However, US FOODS HOLDING is 1.19 times less risky than ENGIE Eps. It trades about 0.15 of its potential returns per unit of risk. ENGIE Eps SA is currently generating about 0.08 per unit of risk. If you would invest  4,900  in US FOODS HOLDING on September 27, 2024 and sell it today you would earn a total of  1,600  from holding US FOODS HOLDING or generate 32.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	92.91%
Values	Daily Returns

US FOODS HOLDING  vs.  ENGIE Eps SA

US FOODS HOLDING

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US FOODS HOLDING are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical indicators, US FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

ENGIE Eps SA

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days ENGIE Eps SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, ENGIE Eps reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US FOODS and ENGIE Eps

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

The idea behind US FOODS HOLDING and ENGIE Eps 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.