Correlation Between Cactus and Saipem SpA
Can any of the company-specific risk be diversified away by investing in both Cactus and Saipem 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 Cactus and Saipem SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cactus Inc and Saipem SpA, you can compare the effects of market volatilities on Cactus and Saipem 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 Cactus with a short position of Saipem SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cactus and Saipem SpA.
Diversification Opportunities for Cactus and Saipem SpA
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cactus and Saipem is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Cactus Inc and Saipem SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saipem SpA and Cactus 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 Cactus Inc are associated (or correlated) with Saipem SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saipem SpA has no effect on the direction of Cactus i.e., Cactus and Saipem SpA go up and down completely randomly.
Pair Corralation between Cactus and Saipem SpA
Considering the 90-day investment horizon Cactus Inc is expected to generate 1.45 times more return on investment than Saipem SpA. However, Cactus is 1.45 times more volatile than Saipem SpA. It trades about 0.27 of its potential returns per unit of risk. Saipem SpA is currently generating about 0.3 per unit of risk. If you would invest 5,726 in Cactus Inc on August 31, 2024 and sell it today you would earn a total of 1,147 from holding Cactus Inc or generate 20.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Cactus Inc vs. Saipem SpA
Performance |
| Timeline |
| Cactus Inc |
| Saipem SpA |
Cactus and Saipem SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cactus and Saipem SpA
The main advantage of trading using opposite Cactus and Saipem SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cactus position performs unexpectedly, Saipem 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 Saipem SpA will offset losses from the drop in Saipem SpA's long position.The idea behind Cactus Inc and Saipem 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.| Saipem SpA vs. Expro Group Holdings | Saipem SpA vs. ChampionX | Saipem SpA vs. Ranger Energy Services | Saipem SpA vs. Cactus Inc |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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