Correlation Between Compagnie and Engie SA

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

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

Diversification Opportunities for Compagnie and Engie SA

0.51

Correlation Coefficient

Compagnie  Engie SA

Very weak diversification

The 3 months correlation between Compagnie and Engie is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie du Cambodge and Engie SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie SA and Compagnie 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 Compagnie du Cambodge 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 Compagnie i.e., Compagnie and Engie SA go up and down completely randomly.

Pair Corralation between Compagnie and Engie SA

Assuming the 90 days trading horizon Compagnie is expected to generate 1.8 times less return on investment than Engie SA. But when comparing it to its historical volatility, Compagnie du Cambodge is 1.02 times less risky than Engie SA. It trades about 0.17 of its potential returns per unit of risk. Engie SA is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,358  in Engie SA on March 5, 2024 and sell it today you would earn a total of  196.00  from holding Engie SA or generate 14.43% return on investment over 90 days.

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

Compagnie du Cambodge  vs.  Engie SA

Compagnie du Cambodge

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compagnie du Cambodge are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Compagnie may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Engie SA

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Engie SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Engie SA sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compagnie and Engie SA

The main advantage of trading using opposite Compagnie and Engie SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie 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 Compagnie du Cambodge 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.