Correlation Between Saipem SpA and SwissCom

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

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

Diversification Opportunities for Saipem SpA and SwissCom

-0.94

Correlation Coefficient

Saipem SpA  SwissCom

Pay attention - limited upside

The 3 months correlation between Saipem and SwissCom is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Saipem SpA and SwissCom AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SwissCom AG 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 SwissCom. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SwissCom AG has no effect on the direction of Saipem SpA i.e., Saipem SpA and SwissCom go up and down completely randomly.

Pair Corralation between Saipem SpA and SwissCom

Assuming the 90 days horizon Saipem SpA is expected to generate 1.11 times more return on investment than SwissCom. However, Saipem SpA is 1.11 times more volatile than SwissCom AG. It trades about 0.22 of its potential returns per unit of risk. SwissCom AG is currently generating about 0.0 per unit of risk. If you would invest  245.00  in Saipem SpA on September 27, 2024 and sell it today you would earn a total of  11.00  from holding Saipem SpA or generate 4.49% 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.  SwissCom AG

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.

SwissCom AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SwissCom AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Saipem SpA and SwissCom

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

The idea behind Saipem SpA and SwissCom AG 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.