Correlation Between Eni SPA and Natural Resource

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

Diversification Opportunities for Eni SPA and Natural Resource

0.01

Correlation Coefficient

Eni SPA  Natural Resource

Significant diversification

The 3 months correlation between Eni and Natural is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and Natural Resource Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Resource Partners 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 Natural Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Resource Partners has no effect on the direction of Eni SPA i.e., Eni SPA and Natural Resource go up and down completely randomly.

Pair Corralation between Eni SPA and Natural Resource

Taking into account the 90-day investment horizon Eni SpA ADR is expected to generate 0.39 times more return on investment than Natural Resource. However, Eni SpA ADR is 2.6 times less risky than Natural Resource. It trades about 0.26 of its potential returns per unit of risk. Natural Resource Partners is currently generating about 0.03 per unit of risk. If you would invest  2,616  in Eni SpA ADR on December 26, 2024 and sell it today you would earn a total of  475.00  from holding Eni SpA ADR or generate 18.16% return on investment over 90 days.

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

Eni SpA ADR  vs.  Natural Resource Partners

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 20 (%) 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.

Natural Resource Partners

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Resource Partners are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Natural Resource is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Eni SPA and Natural Resource

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

The idea behind Eni SpA ADR and Natural Resource Partners 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.