Correlation Between Eni SPA and Transocean

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

Diversification Opportunities for Eni SPA and Transocean

0.63

Correlation Coefficient

Eni SPA  Transocean

Poor diversification

The 3 months correlation between Eni and Transocean is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and Transocean in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transocean 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 Transocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transocean has no effect on the direction of Eni SPA i.e., Eni SPA and Transocean go up and down completely randomly.

Pair Corralation between Eni SPA and Transocean

Taking into account the 90-day investment horizon Eni SpA ADR is expected to generate 0.43 times more return on investment than Transocean. However, Eni SpA ADR is 2.31 times less risky than Transocean. It trades about -0.49 of its potential returns per unit of risk. Transocean is currently generating about -0.46 per unit of risk. If you would invest  2,889  in Eni SpA ADR on September 22, 2024 and sell it today you would lose (252.00) from holding Eni SpA ADR or give up 8.72% of portfolio value over 90 days.

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

Eni SpA ADR  vs.  Transocean

Eni SpA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eni SpA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Transocean

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transocean has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Eni SPA and Transocean

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

The idea behind Eni SpA ADR and Transocean 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.