Correlation Between Eni SPA and Petrus Resources

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

Diversification Opportunities for Eni SPA and Petrus Resources

-0.36

Correlation Coefficient

Eni SPA  Petrus Resources

Very good diversification

The 3 months correlation between Eni and Petrus is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and Petrus Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petrus Resources 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 Petrus Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petrus Resources has no effect on the direction of Eni SPA i.e., Eni SPA and Petrus Resources go up and down completely randomly.

Pair Corralation between Eni SPA and Petrus Resources

Taking into account the 90-day investment horizon Eni SpA ADR is expected to generate 0.49 times more return on investment than Petrus Resources. However, Eni SpA ADR is 2.04 times less risky than Petrus Resources. It trades about 0.21 of its potential returns per unit of risk. Petrus Resources is currently generating about 0.01 per unit of risk. If you would invest  2,685  in Eni SpA ADR on December 17, 2024 and sell it today you would earn a total of  378.00  from holding Eni SpA ADR or generate 14.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Eni SpA ADR  vs.  Petrus Resources

Eni SpA ADR

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eni SpA ADR are ranked lower than 16 (%) 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.

Petrus Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Petrus Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Petrus Resources 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 Petrus Resources

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

The idea behind Eni SpA ADR and Petrus Resources 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.