Correlation Between Eni SPA and High Arctic

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Can any of the company-specific risk be diversified away by investing in both Eni SPA and High Arctic 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 High Arctic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enterprise Group and High Arctic Energy, you can compare the effects of market volatilities on Eni SPA and High Arctic 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 High Arctic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and High Arctic.

Diversification Opportunities for Eni SPA and High Arctic

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between Eni and High is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Group and High Arctic Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on High Arctic Energy 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 High Arctic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of High Arctic Energy has no effect on the direction of Eni SPA i.e., Eni SPA and High Arctic go up and down completely randomly.

Pair Corralation between Eni SPA and High Arctic

Given the investment horizon of 90 days Enterprise Group is expected to generate 5.42 times more return on investment than High Arctic. However, Eni SPA is 5.42 times more volatile than High Arctic Energy. It trades about 0.21 of its potential returns per unit of risk. High Arctic Energy is currently generating about -0.06 per unit of risk. If you would invest  136.00  in Enterprise Group on September 18, 2024 and sell it today you would earn a total of  56.00  from holding Enterprise Group or generate 41.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Enterprise Group  vs.  High Arctic Energy

 Performance 
       Timeline  
Enterprise Group 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Group are ranked lower than 13 (%) 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.
High Arctic Energy 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in High Arctic Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, High Arctic is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Eni SPA and High Arctic Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Eni SPA and High Arctic

The main advantage of trading using opposite Eni SPA and High Arctic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eni SPA position performs unexpectedly, High Arctic 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 High Arctic will offset losses from the drop in High Arctic's long position.
The idea behind Enterprise Group and High Arctic Energy 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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