Correlation Between High Arctic and Eni SPA

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

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

Diversification Opportunities for High Arctic and Eni SPA

0.3

Correlation Coefficient

High Arctic  Eni SPA

Weak diversification

The 3 months correlation between High and Eni is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding High Arctic Energy and Enterprise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Group and High Arctic 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 High Arctic Energy are associated (or correlated) with Eni SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Group has no effect on the direction of High Arctic i.e., High Arctic and Eni SPA go up and down completely randomly.

Pair Corralation between High Arctic and Eni SPA

Assuming the 90 days trading horizon High Arctic Energy is expected to generate 0.5 times more return on investment than Eni SPA. However, High Arctic Energy is 2.01 times less risky than Eni SPA. It trades about 0.0 of its potential returns per unit of risk. Enterprise Group is currently generating about -0.06 per unit of risk. If you would invest  113.00  in High Arctic Energy on December 27, 2024 and sell it today you would lose (3.00) from holding High Arctic Energy or give up 2.65% of portfolio value over 90 days.

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

High Arctic Energy  vs.  Enterprise Group

High Arctic Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days High Arctic Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, High Arctic is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Enterprise Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enterprise Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with High Arctic and Eni SPA

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

The idea behind High Arctic Energy and Enterprise Group 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.