Correlation Between Eni SPA and MEG Energy
Can any of the company-specific risk be diversified away by investing in both Eni SPA and MEG Energy 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 MEG Energy 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 MEG Energy Corp, you can compare the effects of market volatilities on Eni SPA and MEG Energy 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 MEG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and MEG Energy.
Diversification Opportunities for Eni SPA and MEG Energy
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eni and MEG is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and MEG Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEG Energy Corp 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 MEG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEG Energy Corp has no effect on the direction of Eni SPA i.e., Eni SPA and MEG Energy go up and down completely randomly.
Pair Corralation between Eni SPA and MEG Energy
Taking into account the 90-day investment horizon Eni SpA ADR is expected to generate 0.55 times more return on investment than MEG Energy. However, Eni SpA ADR is 1.83 times less risky than MEG Energy. It trades about -0.15 of its potential returns per unit of risk. MEG Energy Corp is currently generating about -0.08 per unit of risk. If you would invest 3,172 in Eni SpA ADR on August 29, 2024 and sell it today you would lose (360.00) from holding Eni SpA ADR or give up 11.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eni SpA ADR vs. MEG Energy Corp
Performance |
| Timeline |
| Eni SpA ADR |
| MEG Energy Corp |
Eni SPA and MEG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eni SPA and MEG Energy
The main advantage of trading using opposite Eni SPA and MEG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eni SPA position performs unexpectedly, MEG Energy 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 MEG Energy will offset losses from the drop in MEG Energy'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 |
| MEG Energy vs. Gear Energy | MEG Energy vs. Tamarack Valley Energy | MEG Energy vs. Cardinal Energy | MEG Energy vs. Whitecap Resources |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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