Correlation Between Equinor ASA and Eni SpA
Can any of the company-specific risk be diversified away by investing in both Equinor ASA 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 Equinor ASA and Eni SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinor ASA ADR and Eni SpA, you can compare the effects of market volatilities on Equinor ASA 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 Equinor ASA with a short position of Eni SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Eni SpA.
Diversification Opportunities for Equinor ASA and Eni SpA
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Equinor and Eni is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR and Eni SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA and Equinor ASA 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 Equinor ASA ADR 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 Eni SpA has no effect on the direction of Equinor ASA i.e., Equinor ASA and Eni SpA go up and down completely randomly.
Pair Corralation between Equinor ASA and Eni SpA
Given the investment horizon of 90 days Equinor ASA ADR is expected to under-perform the Eni SpA. But the stock apears to be less risky and, when comparing its historical volatility, Equinor ASA ADR is 1.51 times less risky than Eni SpA. The stock trades about -0.06 of its potential returns per unit of risk. The Eni SpA is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,341 in Eni SpA on November 2, 2024 and sell it today you would earn a total of 94.00 from holding Eni SpA or generate 7.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA ADR vs. Eni SpA
Performance |
| Timeline |
| Equinor ASA ADR |
| Eni SpA |
Equinor ASA and Eni SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Eni SpA
The main advantage of trading using opposite Equinor ASA and Eni SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA 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.| Equinor ASA vs. Shell PLC ADR | Equinor ASA vs. BP PLC ADR | Equinor ASA vs. Eni SpA ADR | Equinor ASA vs. Galp Energa |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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