Correlation Between Eni SPA and Hess
Can any of the company-specific risk be diversified away by investing in both Eni SPA and Hess 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 Eni SPA and Hess into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eni SpA ADR and Hess Corporation, you can compare the effects of market volatilities on Eni SPA and Hess 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 Eni SPA with a short position of Hess. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and Hess.
Diversification Opportunities for Eni SPA and Hess
Poor diversification
The 3 months correlation between Eni and Hess is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess and Eni SPA 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 Eni SpA ADR are associated (or correlated) with Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of Eni SPA i.e., Eni SPA and Hess go up and down completely randomly.
Pair Corralation between Eni SPA and Hess
Taking into account the 90-day investment horizon Eni SpA ADR is expected to generate 0.89 times more return on investment than Hess. However, Eni SpA ADR is 1.12 times less risky than Hess. It trades about 0.21 of its potential returns per unit of risk. Hess Corporation is currently generating about 0.15 per unit of risk. If you would invest 3,149 in Eni SpA ADR on January 24, 2024 and sell it today you would earn a total of 132.00 from holding Eni SpA ADR or generate 4.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eni SpA ADR vs. Hess Corp.
Performance |
| Timeline |
| Eni SpA ADR |
| Hess |
Eni SPA and Hess Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eni SPA and Hess
The main advantage of trading using opposite Eni SPA and Hess positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eni SPA position performs unexpectedly, Hess 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 Hess will offset losses from the drop in Hess' long position.The idea behind Eni SpA ADR and Hess Corporation 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.| Hess vs. Diamondback Energy | Hess vs. ConocoPhillips | Hess vs. Pioneer Natural Resources | Hess vs. APA Corporation |
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 Stocks Directory module to find actively traded stocks across global markets.
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