Correlation Between Eni SPA and Bri Chem

Can any of the company-specific risk be diversified away by investing in both Eni SPA and Bri Chem 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 Bri Chem into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enterprise Group and Bri Chem Corp, you can compare the effects of market volatilities on Eni SPA and Bri Chem 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 Bri Chem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and Bri Chem.

Diversification Opportunities for Eni SPA and Bri Chem

-0.34

Correlation Coefficient

Eni SPA  Bri Chem

Very good diversification

The 3 months correlation between Eni and Bri is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Group and Bri Chem Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bri Chem Corp 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 Enterprise Group are associated (or correlated) with Bri Chem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bri Chem Corp has no effect on the direction of Eni SPA i.e., Eni SPA and Bri Chem go up and down completely randomly.

Pair Corralation between Eni SPA and Bri Chem

Given the investment horizon of 90 days Enterprise Group is expected to generate 0.67 times more return on investment than Bri Chem. However, Enterprise Group is 1.5 times less risky than Bri Chem. It trades about 0.15 of its potential returns per unit of risk. Bri Chem Corp is currently generating about -0.02 per unit of risk. If you would invest  153.00  in Enterprise Group on September 2, 2024 and sell it today you would earn a total of  73.00  from holding Enterprise Group or generate 47.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Enterprise Group  vs.  Bri Chem Corp

Enterprise Group

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Eni SPA displayed solid returns over the last few months and may actually be approaching a breakup point.

Bri Chem Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bri Chem Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Eni SPA and Bri Chem

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

The idea behind Enterprise Group and Bri Chem Corp 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..