Correlation Between Engie SA and Iberdrola
Can any of the company-specific risk be diversified away by investing in both Engie SA and Iberdrola 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 Engie SA and Iberdrola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Engie SA ADR and Iberdrola SA, you can compare the effects of market volatilities on Engie SA and Iberdrola 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 Engie SA with a short position of Iberdrola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engie SA and Iberdrola.
Diversification Opportunities for Engie SA and Iberdrola
Very poor diversification
The 3 months correlation between Engie and Iberdrola is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Engie SA ADR and Iberdrola SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberdrola SA and Engie SA 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 Engie SA ADR are associated (or correlated) with Iberdrola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iberdrola SA has no effect on the direction of Engie SA i.e., Engie SA and Iberdrola go up and down completely randomly.
Pair Corralation between Engie SA and Iberdrola
Assuming the 90 days horizon Engie SA ADR is expected to generate 1.06 times more return on investment than Iberdrola. However, Engie SA is 1.06 times more volatile than Iberdrola SA. It trades about 0.05 of its potential returns per unit of risk. Iberdrola SA is currently generating about 0.05 per unit of risk. If you would invest 1,199 in Engie SA ADR on September 12, 2024 and sell it today you would earn a total of 396.00 from holding Engie SA ADR or generate 33.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Engie SA ADR vs. Iberdrola SA
Performance |
| Timeline |
| Engie SA ADR |
| Iberdrola SA |
Engie SA and Iberdrola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Engie SA and Iberdrola
The main advantage of trading using opposite Engie SA and Iberdrola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engie SA position performs unexpectedly, Iberdrola 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 Iberdrola will offset losses from the drop in Iberdrola's long position.The idea behind Engie SA ADR and Iberdrola 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.| Iberdrola vs. EDP Energias de | Iberdrola vs. ENEL Societa per | Iberdrola vs. Engie SA ADR | Iberdrola vs. RWE AG PK |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| CEOs Directory Screen CEOs from public companies around the world |