Correlation Between Naturgy Energy and Snam SpA

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

By analyzing existing cross correlation between Naturgy Energy Group and Snam SpA, you can compare the effects of market volatilities on Naturgy Energy and Snam SpA 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 Naturgy Energy with a short position of Snam SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naturgy Energy and Snam SpA.

Diversification Opportunities for Naturgy Energy and Snam SpA

0.79

Correlation Coefficient

Naturgy Energy  Snam SpA

Poor diversification

The 3 months correlation between Naturgy and Snam is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Naturgy Energy Group and Snam SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snam SpA and Naturgy Energy 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 Naturgy Energy Group are associated (or correlated) with Snam SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Snam SpA has no effect on the direction of Naturgy Energy i.e., Naturgy Energy and Snam SpA go up and down completely randomly.

Pair Corralation between Naturgy Energy and Snam SpA

Assuming the 90 days horizon Naturgy Energy Group is expected to generate 1.22 times more return on investment than Snam SpA. However, Naturgy Energy is 1.22 times more volatile than Snam SpA. It trades about 0.14 of its potential returns per unit of risk. Snam SpA is currently generating about 0.16 per unit of risk. If you would invest  2,250  in Naturgy Energy Group on December 20, 2024 and sell it today you would earn a total of  278.00  from holding Naturgy Energy Group or generate 12.36% return on investment over 90 days.

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

Naturgy Energy Group  vs.  Snam SpA

Naturgy Energy Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Naturgy Energy Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Naturgy Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Snam SpA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Snam SpA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Snam SpA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Naturgy Energy and Snam SpA

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

The idea behind Naturgy Energy Group and Snam SpA 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.