Correlation Between IShares Canadian and Eni SPA

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

By analyzing existing cross correlation between iShares Canadian HYBrid and Enterprise Group, you can compare the effects of market volatilities on IShares Canadian and Eni 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 IShares Canadian with a short position of Eni SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Canadian and Eni SPA.

Diversification Opportunities for IShares Canadian and Eni SPA

0.51

Correlation Coefficient

IShares Canadian  Eni SPA

Very weak diversification

The 3 months correlation between IShares and Eni is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding iShares Canadian HYBrid and Enterprise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Group and IShares Canadian 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 iShares Canadian HYBrid are associated (or correlated) with Eni SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Group has no effect on the direction of IShares Canadian i.e., IShares Canadian and Eni SPA go up and down completely randomly.

Pair Corralation between IShares Canadian and Eni SPA

Assuming the 90 days trading horizon IShares Canadian is expected to generate 14.06 times less return on investment than Eni SPA. But when comparing it to its historical volatility, iShares Canadian HYBrid is 7.5 times less risky than Eni SPA. It trades about 0.07 of its potential returns per unit of risk. Enterprise Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  12.00  in Enterprise Group on September 23, 2024 and sell it today you would earn a total of  170.00  from holding Enterprise Group or generate 1416.67% return on investment over 90 days.

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

iShares Canadian HYBrid  vs.  Enterprise Group

iShares Canadian HYBrid

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Canadian HYBrid are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, IShares Canadian is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Enterprise Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Eni SPA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Canadian and Eni SPA

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

The idea behind iShares Canadian HYBrid and Enterprise Group 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.