Correlation Between High Yield and Saipem SpA

Can any of the company-specific risk be diversified away by investing in both High Yield and Saipem SpA 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 High Yield and Saipem SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between High Yield Municipal Fund and Saipem SpA, you can compare the effects of market volatilities on High Yield and Saipem SpA 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 High Yield with a short position of Saipem SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of High Yield and Saipem SpA.

Diversification Opportunities for High Yield and Saipem SpA

0.22

Correlation Coefficient

High Yield  Saipem SpA

Modest diversification

The 3 months correlation between High and Saipem is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding High Yield Municipal Fund and Saipem SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saipem SpA and High Yield 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 High Yield Municipal Fund are associated (or correlated) with Saipem SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saipem SpA has no effect on the direction of High Yield i.e., High Yield and Saipem SpA go up and down completely randomly.

Pair Corralation between High Yield and Saipem SpA

Assuming the 90 days horizon High Yield is expected to generate 13.28 times less return on investment than Saipem SpA. But when comparing it to its historical volatility, High Yield Municipal Fund is 5.34 times less risky than Saipem SpA. It trades about 0.09 of its potential returns per unit of risk. Saipem SpA is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  245.00  in Saipem SpA on September 15, 2024 and sell it today you would earn a total of  11.00  from holding Saipem SpA or generate 4.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

High Yield Municipal Fund  vs.  Saipem SpA

High Yield Municipal

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days High Yield Municipal Fund has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, High Yield is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Saipem SpA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saipem SpA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, Saipem SpA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with High Yield and Saipem SpA

The main advantage of trading using opposite High Yield and Saipem SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if High Yield position performs unexpectedly, Saipem SpA 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 Saipem SpA will offset losses from the drop in Saipem SpA's long position.

The idea behind High Yield Municipal Fund and Saipem SpA 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.