Correlation Between North American and Snam SpA

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

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

Diversification Opportunities for North American and Snam SpA

-0.82

Correlation Coefficient

North American  Snam SpA

Pay attention - limited upside

The 3 months correlation between North and Snam is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding North American Construction and Snam SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Snam SpA and North American 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 North American Construction 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 North American i.e., North American and Snam SpA go up and down completely randomly.

Pair Corralation between North American and Snam SpA

Assuming the 90 days horizon North American Construction is expected to under-perform the Snam SpA. In addition to that, North American is 1.91 times more volatile than Snam SpA. It trades about -0.19 of its total potential returns per unit of risk. Snam SpA is currently generating about 0.16 per unit of volatility. If you would invest  412.00  in Snam SpA on December 25, 2024 and sell it today you would earn a total of  50.00  from holding Snam SpA or generate 12.14% return on investment over 90 days.

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

North American Construction  vs.  Snam SpA

North American Const

Risk-Adjusted Performance

Very Weak

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

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 uncertain basic indicators, Snam SpA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with North American and Snam SpA

The main advantage of trading using opposite North American and Snam SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if North American 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 North American Construction 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.