Correlation Between Saipem SpA and FEC Resources

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

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

Diversification Opportunities for Saipem SpA and FEC Resources

-0.2

Correlation Coefficient

Saipem SpA  FEC Resources

Good diversification

The 3 months correlation between Saipem and FEC is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Saipem SpA and FEC Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FEC Resources and Saipem 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 Saipem SpA are associated (or correlated) with FEC Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FEC Resources has no effect on the direction of Saipem SpA i.e., Saipem SpA and FEC Resources go up and down completely randomly.

Pair Corralation between Saipem SpA and FEC Resources

Assuming the 90 days horizon Saipem SpA is expected to under-perform the FEC Resources. But the pink sheet apears to be less risky and, when comparing its historical volatility, Saipem SpA is 4.41 times less risky than FEC Resources. The pink sheet trades about -0.12 of its potential returns per unit of risk. The FEC Resources is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  0.27  in FEC Resources on December 25, 2024 and sell it today you would lose (0.04) from holding FEC Resources or give up 14.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Saipem SpA  vs.  FEC Resources

Saipem SpA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Saipem SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary 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.

FEC Resources

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in FEC Resources are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, FEC Resources may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Saipem SpA and FEC Resources

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

The idea behind Saipem SpA and FEC Resources 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.