Correlation Between Eni SPA and Freehold Royalties

Can any of the company-specific risk be diversified away by investing in both Eni SPA and Freehold Royalties 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 Freehold Royalties 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 Freehold Royalties, you can compare the effects of market volatilities on Eni SPA and Freehold Royalties 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 Freehold Royalties. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and Freehold Royalties.

Diversification Opportunities for Eni SPA and Freehold Royalties

-0.03

Correlation Coefficient

Eni SPA  Freehold Royalties

Good diversification

The 3 months correlation between Eni and Freehold is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and Freehold Royalties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freehold Royalties 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 Freehold Royalties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freehold Royalties has no effect on the direction of Eni SPA i.e., Eni SPA and Freehold Royalties go up and down completely randomly.

Pair Corralation between Eni SPA and Freehold Royalties

Taking into account the 90-day investment horizon Eni SpA ADR is expected to generate 0.78 times more return on investment than Freehold Royalties. However, Eni SpA ADR is 1.28 times less risky than Freehold Royalties. It trades about 0.27 of its potential returns per unit of risk. Freehold Royalties is currently generating about 0.05 per unit of risk. If you would invest  2,632  in Eni SpA ADR on December 19, 2024 and sell it today you would earn a total of  470.00  from holding Eni SpA ADR or generate 17.86% return on investment over 90 days.

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

Eni SpA ADR  vs.  Freehold Royalties

Eni SpA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eni SpA ADR are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Eni SPA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Freehold Royalties

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Freehold Royalties are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Freehold Royalties is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Eni SPA and Freehold Royalties

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

The idea behind Eni SpA ADR and Freehold Royalties 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.