Correlation Between Waga Energy and Entech SE

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

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

Diversification Opportunities for Waga Energy and Entech SE

-0.48

Correlation Coefficient

Waga Energy  Entech SE

Very good diversification

The 3 months correlation between Waga and Entech is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Waga Energy SA and Entech SE SAS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entech SE SAS and Waga Energy 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 Waga Energy SA are associated (or correlated) with Entech SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entech SE SAS has no effect on the direction of Waga Energy i.e., Waga Energy and Entech SE go up and down completely randomly.

Pair Corralation between Waga Energy and Entech SE

Assuming the 90 days trading horizon Waga Energy SA is expected to under-perform the Entech SE. But the stock apears to be less risky and, when comparing its historical volatility, Waga Energy SA is 2.27 times less risky than Entech SE. The stock trades about -0.09 of its potential returns per unit of risk. The Entech SE SAS is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  514.00  in Entech SE SAS on December 2, 2024 and sell it today you would earn a total of  228.00  from holding Entech SE SAS or generate 44.36% return on investment over 90 days.

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

Waga Energy SA  vs.  Entech SE SAS

Waga Energy SA

Risk-Adjusted Performance

Very Weak

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

Entech SE SAS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entech SE SAS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Entech SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Waga Energy and Entech SE

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

The idea behind Waga Energy SA and Entech SE SAS 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.