Correlation Between Saipem SpA and Pulse Seismic

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

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

Diversification Opportunities for Saipem SpA and Pulse Seismic

-0.63

Correlation Coefficient

Saipem SpA  Pulse Seismic

Excellent diversification

The 3 months correlation between Saipem and Pulse is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Saipem SpA and Pulse Seismic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pulse Seismic 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 Pulse Seismic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pulse Seismic has no effect on the direction of Saipem SpA i.e., Saipem SpA and Pulse Seismic go up and down completely randomly.

Pair Corralation between Saipem SpA and Pulse Seismic

Assuming the 90 days horizon Saipem SpA is expected to generate 0.94 times more return on investment than Pulse Seismic. However, Saipem SpA is 1.07 times less risky than Pulse Seismic. It trades about 0.01 of its potential returns per unit of risk. Pulse Seismic is currently generating about -0.02 per unit of risk. If you would invest  256.00  in Saipem SpA on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Saipem SpA or generate 0.0% return on investment over 90 days.

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

Saipem SpA  vs.  Pulse Seismic

Saipem SpA

Risk-Adjusted Performance

12 of 100

Good

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

Pulse Seismic

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Saipem SpA and Pulse Seismic

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

The idea behind Saipem SpA and Pulse Seismic 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.