Correlation Between Eni SpA and MOL PLC

Can any of the company-specific risk be diversified away by investing in both Eni SpA and MOL PLC 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 MOL PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eni SpA and MOL PLC ADR, you can compare the effects of market volatilities on Eni SpA and MOL PLC 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 MOL PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SpA and MOL PLC.

Diversification Opportunities for Eni SpA and MOL PLC

-0.17

Correlation Coefficient

Eni SpA  MOL PLC

Good diversification

The 3 months correlation between Eni and MOL is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA and MOL PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MOL PLC ADR 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 are associated (or correlated) with MOL PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MOL PLC ADR has no effect on the direction of Eni SpA i.e., Eni SpA and MOL PLC go up and down completely randomly.

Pair Corralation between Eni SpA and MOL PLC

Assuming the 90 days horizon Eni SpA is expected to generate 3.87 times more return on investment than MOL PLC. However, Eni SpA is 3.87 times more volatile than MOL PLC ADR. It trades about 0.04 of its potential returns per unit of risk. MOL PLC ADR is currently generating about 0.03 per unit of risk. If you would invest  1,273  in Eni SpA on September 5, 2024 and sell it today you would earn a total of  212.00  from holding Eni SpA or generate 16.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.1%
Values	Daily Returns

Eni SpA  vs.  MOL PLC ADR

Eni SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eni SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Eni SpA is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

MOL PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MOL PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Eni SpA and MOL PLC

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

The idea behind Eni SpA and MOL PLC ADR 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.