Correlation Between UNITED UTILITIES and Engie SA

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

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

Diversification Opportunities for UNITED UTILITIES and Engie SA

-0.64

Correlation Coefficient

UNITED UTILITIES  Engie SA

Excellent diversification

The 3 months correlation between UNITED and Engie is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and Engie SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie SA and UNITED UTILITIES 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 UNITED UTILITIES GR 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 has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and Engie SA go up and down completely randomly.

Pair Corralation between UNITED UTILITIES and Engie SA

Assuming the 90 days trading horizon UNITED UTILITIES GR is expected to under-perform the Engie SA. In addition to that, UNITED UTILITIES is 1.2 times more volatile than Engie SA. It trades about -0.05 of its total potential returns per unit of risk. Engie SA is currently generating about 0.19 per unit of volatility. If you would invest  1,505  in Engie SA on December 21, 2024 and sell it today you would earn a total of  245.00  from holding Engie SA or generate 16.28% return on investment over 90 days.

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

UNITED UTILITIES GR  vs.  Engie SA

UNITED UTILITIES

Risk-Adjusted Performance

Very Weak

Over the last 90 days UNITED UTILITIES GR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, UNITED UTILITIES is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Engie SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Engie SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Engie SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with UNITED UTILITIES and Engie SA

The main advantage of trading using opposite UNITED UTILITIES and Engie SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED UTILITIES 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 UNITED UTILITIES GR and Engie 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.