Correlation Between UGI and Enagas SA
Can any of the company-specific risk be diversified away by investing in both UGI and Enagas 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 UGI and Enagas SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UGI Corporation and Enagas SA, you can compare the effects of market volatilities on UGI and Enagas 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 UGI with a short position of Enagas SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of UGI and Enagas SA.
Diversification Opportunities for UGI and Enagas SA
Very good diversification
The 3 months correlation between UGI and Enagas is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding UGI Corp. and Enagas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enagas SA and UGI 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 UGI Corporation are associated (or correlated) with Enagas SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enagas SA has no effect on the direction of UGI i.e., UGI and Enagas SA go up and down completely randomly.
Pair Corralation between UGI and Enagas SA
Considering the 90-day investment horizon UGI Corporation is expected to generate 2.97 times more return on investment than Enagas SA. However, UGI is 2.97 times more volatile than Enagas SA. It trades about 0.31 of its potential returns per unit of risk. Enagas SA is currently generating about -0.18 per unit of risk. If you would invest 2,416 in UGI Corporation on August 31, 2024 and sell it today you would earn a total of 588.00 from holding UGI Corporation or generate 24.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UGI Corp. vs. Enagas SA
Performance |
| Timeline |
| UGI Corporation |
| Enagas SA |
UGI and Enagas SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UGI and Enagas SA
The main advantage of trading using opposite UGI and Enagas SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UGI position performs unexpectedly, Enagas 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 Enagas SA will offset losses from the drop in Enagas SA's long position.The idea behind UGI Corporation and Enagas 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.| Enagas SA vs. Northwest Natural Gas | Enagas SA vs. Chesapeake Utilities | Enagas SA vs. One Gas | Enagas SA vs. NiSource |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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