Correlation Between BP PLC and Eni SPA
Can any of the company-specific risk be diversified away by investing in both BP PLC 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 BP PLC and Eni SPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP PLC ADR and Eni SpA ADR, you can compare the effects of market volatilities on BP PLC 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 BP PLC with a short position of Eni SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP PLC and Eni SPA.
Diversification Opportunities for BP PLC and Eni SPA
Very poor diversification
The 3 months correlation between BP PLC and Eni is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC ADR and Eni SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA ADR and BP PLC 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 BP PLC 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 ADR has no effect on the direction of BP PLC i.e., BP PLC and Eni SPA go up and down completely randomly.
Pair Corralation between BP PLC and Eni SPA
Allowing for the 90-day total investment horizon BP PLC ADR is expected to generate 0.79 times more return on investment than Eni SPA. However, BP PLC ADR is 1.27 times less risky than Eni SPA. It trades about 0.3 of its potential returns per unit of risk. Eni SpA ADR is currently generating about 0.18 per unit of risk. If you would invest 3,746 in BP PLC ADR on January 27, 2024 and sell it today you would earn a total of 216.00 from holding BP PLC ADR or generate 5.77% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
BP PLC ADR vs. Eni SpA ADR
Performance |
Timeline |
BP PLC ADR |
Eni SpA ADR |
BP PLC and Eni SPA Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BP PLC and Eni SPA
The main advantage of trading using opposite BP PLC and Eni SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP PLC 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.BP PLC vs. TotalEnergies SE ADR | BP PLC vs. Chevron Corp | BP PLC vs. Exxon Mobil Corp | BP PLC vs. Equinor ASA ADR |
Eni SPA vs. TotalEnergies SE ADR | Eni SPA vs. Ecopetrol SA ADR | Eni SPA vs. Shell PLC ADR | Eni SPA vs. Petroleo Brasileiro Petrobras |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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