Correlation Between Eni SPA and National Fuel

Can any of the company-specific risk be diversified away by investing in both Eni SPA and National Fuel 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 National Fuel 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 National Fuel Gas, you can compare the effects of market volatilities on Eni SPA and National Fuel 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 National Fuel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and National Fuel.

Diversification Opportunities for Eni SPA and National Fuel

0.78

Correlation Coefficient

Eni SPA  National Fuel

Poor diversification

The 3 months correlation between Eni and National is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and National Fuel Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Fuel Gas 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 National Fuel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Fuel Gas has no effect on the direction of Eni SPA i.e., Eni SPA and National Fuel go up and down completely randomly.

Pair Corralation between Eni SPA and National Fuel

Taking into account the 90-day investment horizon Eni SpA ADR is expected to generate 0.98 times more return on investment than National Fuel. However, Eni SpA ADR is 1.02 times less risky than National Fuel. It trades about 0.03 of its potential returns per unit of risk. National Fuel Gas is currently generating about -0.01 per unit of risk. If you would invest  3,184  in Eni SpA ADR on February 1, 2024 and sell it today you would earn a total of  19.00  from holding Eni SpA ADR or generate 0.6% return on investment over 90 days.

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

Eni SpA ADR  vs.  National Fuel Gas

Eni SpA ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eni SpA ADR are ranked lower than 2 (%) 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.

National Fuel Gas

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in National Fuel Gas are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, National Fuel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eni SPA and National Fuel

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

The idea behind Eni SpA ADR and National Fuel Gas 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..