Correlation Between Eni SPA and Chevron Corp

Can any of the company-specific risk be diversified away by investing in both Eni SPA and Chevron Corp 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 Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eni SpA ADR and Chevron Corp, you can compare the effects of market volatilities on Eni SPA and Chevron Corp 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 Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and Chevron Corp.

Diversification Opportunities for Eni SPA and Chevron Corp

0.47

Correlation Coefficient

Eni SPA  Chevron Corp

Very weak diversification

The 3 months correlation between Eni and Chevron is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 ADR are associated (or correlated) with Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Eni SPA i.e., Eni SPA and Chevron Corp go up and down completely randomly.

Pair Corralation between Eni SPA and Chevron Corp

Taking into account the 90-day investment horizon Eni SpA ADR is expected to generate 1.31 times more return on investment than Chevron Corp. However, Eni SPA is 1.31 times more volatile than Chevron Corp. It trades about 0.13 of its potential returns per unit of risk. Chevron Corp is currently generating about 0.0 per unit of risk. If you would invest  3,141  in Eni SpA ADR on January 19, 2024 and sell it today you would earn a total of  84.00  from holding Eni SpA ADR or generate 2.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Eni SpA ADR  vs.  Chevron Corp

Eni SpA ADR

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eni SpA ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Eni SPA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Chevron Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Eni SPA and Chevron Corp

The main advantage of trading using opposite Eni SPA and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eni SPA position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.

The idea behind Eni SpA ADR and Chevron Corp 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.