Correlation Between Consumers Energy and Engie SA
Can any of the company-specific risk be diversified away by investing in both Consumers Energy 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 Consumers Energy and Engie SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumers Energy and Engie SA ADR, you can compare the effects of market volatilities on Consumers Energy 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 Consumers Energy with a short position of Engie SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumers Energy and Engie SA.
Diversification Opportunities for Consumers Energy and Engie SA
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between Consumers and Engie is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy and Engie SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie SA ADR and Consumers 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 Consumers Energy 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 ADR has no effect on the direction of Consumers Energy i.e., Consumers Energy and Engie SA go up and down completely randomly.
Pair Corralation between Consumers Energy and Engie SA
Assuming the 90 days trading horizon Consumers Energy is expected to generate 1.27 times more return on investment than Engie SA. However, Consumers Energy is 1.27 times more volatile than Engie SA ADR. It trades about -0.07 of its potential returns per unit of risk. Engie SA ADR is currently generating about -0.22 per unit of risk. If you would invest 8,350 in Consumers Energy on September 2, 2024 and sell it today you would lose (170.00) from holding Consumers Energy or give up 2.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumers Energy vs. Engie SA ADR
Performance |
| Timeline |
| Consumers Energy |
| Engie SA ADR |
Consumers Energy and Engie SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumers Energy and Engie SA
The main advantage of trading using opposite Consumers Energy and Engie SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumers Energy 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.| Consumers Energy vs. Nextera Energy | Consumers Energy vs. Duke Energy | Consumers Energy vs. PGE Corp | Consumers Energy vs. Southern Company |
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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