Correlation Between Repsol SA and Eni SpA
Can any of the company-specific risk be diversified away by investing in both Repsol SA 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 Repsol SA and Eni SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Repsol SA and Eni SpA, you can compare the effects of market volatilities on Repsol SA 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 Repsol SA with a short position of Eni SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Repsol SA and Eni SpA.
Diversification Opportunities for Repsol SA and Eni SpA
Poor diversification
The 3 months correlation between Repsol and Eni is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Repsol SA and Eni SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA and Repsol SA 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 Repsol SA 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 Repsol SA i.e., Repsol SA and Eni SpA go up and down completely randomly.
Pair Corralation between Repsol SA and Eni SpA
Assuming the 90 days horizon Repsol SA is expected to under-perform the Eni SpA. But the otc stock apears to be less risky and, when comparing its historical volatility, Repsol SA is 1.98 times less risky than Eni SpA. The otc stock trades about -0.09 of its potential returns per unit of risk. The Eni SpA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,556 in Eni SpA on November 2, 2024 and sell it today you would lose (121.00) from holding Eni SpA or give up 7.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 96.12% |
| Values | Daily Returns |
Repsol SA vs. Eni SpA
Performance |
| Timeline |
| Repsol SA |
| Eni SpA |
Repsol SA and Eni SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Repsol SA and Eni SpA
The main advantage of trading using opposite Repsol SA and Eni SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repsol SA 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 Repsol SA and Eni SpA 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.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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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