Correlation Between Eni SpA and Sterling Construction
Can any of the company-specific risk be diversified away by investing in both Eni SpA and Sterling Construction 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 Sterling Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eni SpA and Sterling Construction, you can compare the effects of market volatilities on Eni SpA and Sterling Construction 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 Sterling Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SpA and Sterling Construction.
Diversification Opportunities for Eni SpA and Sterling Construction
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between Eni and Sterling is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA and Sterling Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sterling Construction 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 are associated (or correlated) with Sterling Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sterling Construction has no effect on the direction of Eni SpA i.e., Eni SpA and Sterling Construction go up and down completely randomly.
Pair Corralation between Eni SpA and Sterling Construction
Assuming the 90 days trading horizon Eni SpA is expected to generate 0.39 times more return on investment than Sterling Construction. However, Eni SpA is 2.55 times less risky than Sterling Construction. It trades about -0.13 of its potential returns per unit of risk. Sterling Construction is currently generating about -0.09 per unit of risk. If you would invest 1,379 in Eni SpA on September 12, 2024 and sell it today you would lose (40.00) from holding Eni SpA or give up 2.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eni SpA vs. Sterling Construction
Performance |
| Timeline |
| Eni SpA |
| Sterling Construction |
Eni SpA and Sterling Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eni SpA and Sterling Construction
The main advantage of trading using opposite Eni SpA and Sterling Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eni SpA position performs unexpectedly, Sterling Construction 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 Sterling Construction will offset losses from the drop in Sterling Construction's long position.| Eni SpA vs. Zijin Mining Group | Eni SpA vs. GRIFFIN MINING LTD | Eni SpA vs. Microchip Technology Incorporated | Eni SpA vs. Amkor Technology |
| Sterling Construction vs. Superior Plus Corp | Sterling Construction vs. SIVERS SEMICONDUCTORS AB | Sterling Construction vs. Norsk Hydro ASA | Sterling Construction vs. Reliance Steel Aluminum |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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