Correlation Between Eni SpA and PetroChina

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

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

Diversification Opportunities for Eni SpA and PetroChina

-0.02

Correlation Coefficient

Eni SpA  PetroChina

Good diversification

The 3 months correlation between Eni and PetroChina is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA and PetroChina Co Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetroChina 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 PetroChina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetroChina has no effect on the direction of Eni SpA i.e., Eni SpA and PetroChina go up and down completely randomly.

Pair Corralation between Eni SpA and PetroChina

Assuming the 90 days horizon Eni SpA is expected to generate 0.66 times more return on investment than PetroChina. However, Eni SpA is 1.52 times less risky than PetroChina. It trades about 0.0 of its potential returns per unit of risk. PetroChina Co Ltd is currently generating about -0.02 per unit of risk. If you would invest  1,521  in Eni SpA on September 5, 2024 and sell it today you would lose (36.00) from holding Eni SpA or give up 2.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Eni SpA  vs.  PetroChina Co Ltd

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.

PetroChina

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Eni SpA and PetroChina

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

The idea behind Eni SpA and PetroChina Co Ltd 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .