Correlation Between Douglas Emmett and Snam SpA

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

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

Diversification Opportunities for Douglas Emmett and Snam SpA

0.29

Correlation Coefficient

Douglas Emmett  Snam SpA

Modest diversification

The 3 months correlation between Douglas and Snam is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Douglas Emmett and Snam SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snam SpA and Douglas Emmett 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 Douglas Emmett are associated (or correlated) with Snam SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snam SpA has no effect on the direction of Douglas Emmett i.e., Douglas Emmett and Snam SpA go up and down completely randomly.

Pair Corralation between Douglas Emmett and Snam SpA

Considering the 90-day investment horizon Douglas Emmett is expected to under-perform the Snam SpA. In addition to that, Douglas Emmett is 3.52 times more volatile than Snam SpA. It trades about -0.07 of its total potential returns per unit of risk. Snam SpA is currently generating about -0.15 per unit of volatility. If you would invest  479.00  in Snam SpA on December 19, 2024 and sell it today you would lose (21.00) from holding Snam SpA or give up 4.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	79.66%
Values	Daily Returns

Douglas Emmett  vs.  Snam SpA

Douglas Emmett

Risk-Adjusted Performance

Very Weak

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's technical and fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Snam SpA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Snam SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Snam SpA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Douglas Emmett and Snam SpA

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

The idea behind Douglas Emmett and Snam 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.