Correlation Between Eni SPA and Equital
Can any of the company-specific risk be diversified away by investing in both Eni SPA and Equital 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 Equital 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 Equital, you can compare the effects of market volatilities on Eni SPA and Equital 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 Equital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and Equital.
Diversification Opportunities for Eni SPA and Equital
Poor diversification
The 1 month correlation between Eni and Equital is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and Equital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equital 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 Equital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equital has no effect on the direction of Eni SPA i.e., Eni SPA and Equital go up and down completely randomly.
Pair Corralation between Eni SPA and Equital
Taking into account the 90-day investment horizon Eni SPA is expected to generate 4.0 times less return on investment than Equital. But when comparing it to its historical volatility, Eni SpA ADR is 2.02 times less risky than Equital. It trades about 0.02 of its potential returns per unit of risk. Equital is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 989,000 in Equital on February 9, 2024 and sell it today you would earn a total of 58,000 from holding Equital or generate 5.86% return on investment over 90 days.
| Time Period | 1 Month [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 80.33% |
| Values | Daily Returns |
Eni SpA ADR vs. Equital
Performance |
| Timeline |
| Eni SpA ADR |
| Equital |
Eni SPA and Equital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eni SPA and Equital
The main advantage of trading using opposite Eni SPA and Equital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eni SPA position performs unexpectedly, Equital 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 Equital will offset losses from the drop in Equital's long position.| Eni SPA vs. TotalEnergies SE ADR | Eni SPA vs. Ecopetrol SA ADR | Eni SPA vs. Shell PLC ADR | Eni SPA vs. Petroleo Brasileiro Petrobras |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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