Correlation Between Eni SPA and Headwater Exploration
Can any of the company-specific risk be diversified away by investing in both Eni SPA and Headwater Exploration 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 Eni SPA and Headwater Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eni SpA ADR and Headwater Exploration, you can compare the effects of market volatilities on Eni SPA and Headwater Exploration 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 Eni SPA with a short position of Headwater Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and Headwater Exploration.
Diversification Opportunities for Eni SPA and Headwater Exploration
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Eni and Headwater is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and Headwater Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Headwater Exploration and Eni 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 Eni SpA ADR are associated (or correlated) with Headwater Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Headwater Exploration has no effect on the direction of Eni SPA i.e., Eni SPA and Headwater Exploration go up and down completely randomly.
Pair Corralation between Eni SPA and Headwater Exploration
Taking into account the 90-day investment horizon Eni SpA ADR is expected to generate 0.64 times more return on investment than Headwater Exploration. However, Eni SpA ADR is 1.56 times less risky than Headwater Exploration. It trades about 0.03 of its potential returns per unit of risk. Headwater Exploration is currently generating about 0.01 per unit of risk. If you would invest 2,693 in Eni SpA ADR on August 26, 2024 and sell it today you would earn a total of 208.00 from holding Eni SpA ADR or generate 7.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 99.7% |
| Values | Daily Returns |
Eni SpA ADR vs. Headwater Exploration
Performance |
| Timeline |
| Eni SpA ADR |
| Headwater Exploration |
Eni SPA and Headwater Exploration Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eni SPA and Headwater Exploration
The main advantage of trading using opposite Eni SPA and Headwater Exploration positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eni SPA position performs unexpectedly, Headwater Exploration 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 Headwater Exploration will offset losses from the drop in Headwater Exploration's long position.| Eni SPA vs. TotalEnergies SE ADR | Eni SPA vs. Ecopetrol SA ADR | Eni SPA vs. Shell PLC ADR | Eni SPA vs. Petroleo Brasileiro Petrobras |
| Headwater Exploration vs. Petroleo Brasileiro Petrobras | Headwater Exploration vs. Equinor ASA ADR | Headwater Exploration vs. Eni SpA ADR | Headwater Exploration vs. YPF Sociedad Anonima |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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