Correlation Between Saipem SpA and Sparta Capital

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

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

Diversification Opportunities for Saipem SpA and Sparta Capital

-0.8

Correlation Coefficient

Saipem SpA  Sparta Capital

Pay attention - limited upside

The 3 months correlation between Saipem and Sparta is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Saipem SpA and Sparta Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sparta Capital 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 Sparta Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sparta Capital has no effect on the direction of Saipem SpA i.e., Saipem SpA and Sparta Capital go up and down completely randomly.

Pair Corralation between Saipem SpA and Sparta Capital

Assuming the 90 days horizon Saipem SpA is expected to generate 0.82 times more return on investment than Sparta Capital. However, Saipem SpA is 1.22 times less risky than Sparta Capital. It trades about 0.18 of its potential returns per unit of risk. Sparta Capital is currently generating about -0.13 per unit of risk. If you would invest  198.00  in Saipem SpA on September 14, 2024 and sell it today you would earn a total of  58.00  from holding Saipem SpA or generate 29.29% return on investment over 90 days.

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

Saipem SpA  vs.  Sparta Capital

Saipem SpA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saipem SpA are ranked lower than 14 (%) 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.

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital 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 January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Saipem SpA and Sparta Capital

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

The idea behind Saipem SpA and Sparta Capital 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.