Correlation Between Vestas Wind and ENGIE Eps

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

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

Diversification Opportunities for Vestas Wind and ENGIE Eps

-0.8

Correlation Coefficient

Vestas Wind  ENGIE Eps

Pay attention - limited upside

The 3 months correlation between Vestas and ENGIE is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems 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 Vestas Wind 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 Vestas Wind Systems 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 Vestas Wind i.e., Vestas Wind and ENGIE Eps go up and down completely randomly.

Pair Corralation between Vestas Wind and ENGIE Eps

Assuming the 90 days trading horizon Vestas Wind Systems is expected to under-perform the ENGIE Eps. In addition to that, Vestas Wind is 1.4 times more volatile than ENGIE Eps SA. It trades about -0.16 of its total potential returns per unit of risk. ENGIE Eps SA is currently generating about 0.13 per unit of volatility. If you would invest  102.00  in ENGIE Eps SA on September 27, 2024 and sell it today you would earn a total of  18.00  from holding ENGIE Eps SA or generate 17.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	85.71%
Values	Daily Returns

Vestas Wind Systems  vs.  ENGIE Eps SA

Vestas Wind Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vestas Wind Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Vestas Wind and ENGIE Eps

The main advantage of trading using opposite Vestas Wind and ENGIE Eps positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind 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 Vestas Wind Systems 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.