Correlation Between Alphabet and Eni SPA

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

By analyzing existing cross correlation between Alphabet Inc Class C and Eni SpA ADR, you can compare the effects of market volatilities on Alphabet 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 Alphabet with a short position of Eni SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alphabet and Eni SPA.

Diversification Opportunities for Alphabet and Eni SPA

0.7

Correlation Coefficient

Alphabet  Eni SPA

Poor diversification

The 3 months correlation between Alphabet and Eni is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc Class C 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 Alphabet 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 Alphabet Inc Class C 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 Alphabet i.e., Alphabet and Eni SPA go up and down completely randomly.

Pair Corralation between Alphabet and Eni SPA

Given the investment horizon of 90 days Alphabet Inc Class C is expected to generate 2.29 times more return on investment than Eni SPA. However, Alphabet is 2.29 times more volatile than Eni SpA ADR. It trades about 0.12 of its potential returns per unit of risk. Eni SpA ADR is currently generating about -0.09 per unit of risk. If you would invest  15,587  in Alphabet Inc Class C on February 2, 2024 and sell it today you would earn a total of  970.00  from holding Alphabet Inc Class C or generate 6.22% return on investment over 90 days.

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

Alphabet Inc Class C  vs.  Eni SpA ADR

Alphabet Class C

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc Class C are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Alphabet reported solid returns over the last few months and may actually be approaching a breakup point.

Eni SpA ADR

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eni SpA ADR are ranked lower than 3 (%) 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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Alphabet and Eni SPA

The main advantage of trading using opposite Alphabet and Eni SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc Class C and Eni SpA ADR 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.