Correlation Between Bri Chem and Eni SPA

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

By analyzing existing cross correlation between Bri Chem Corp and Enterprise Group, you can compare the effects of market volatilities on Bri Chem 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 Bri Chem with a short position of Eni SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bri Chem and Eni SPA.

Diversification Opportunities for Bri Chem and Eni SPA

0.26

Correlation Coefficient

Bri Chem  Eni SPA

Modest diversification

The 3 months correlation between Bri and Eni is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bri Chem Corp and Enterprise Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Group and Bri Chem 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 Bri Chem Corp 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 Enterprise Group has no effect on the direction of Bri Chem i.e., Bri Chem and Eni SPA go up and down completely randomly.

Pair Corralation between Bri Chem and Eni SPA

Assuming the 90 days trading horizon Bri Chem Corp is expected to generate 2.74 times more return on investment than Eni SPA. However, Bri Chem is 2.74 times more volatile than Enterprise Group. It trades about 0.25 of its potential returns per unit of risk. Enterprise Group is currently generating about -0.22 per unit of risk. If you would invest  20.00  in Bri Chem Corp on September 22, 2024 and sell it today you would earn a total of  12.00  from holding Bri Chem Corp or generate 60.0% return on investment over 90 days.

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

Bri Chem Corp  vs.  Enterprise Group

Bri Chem Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bri Chem Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bri Chem displayed solid returns over the last few months and may actually be approaching a breakup point.

Enterprise Group

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Eni SPA displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bri Chem and Eni SPA

The main advantage of trading using opposite Bri Chem and Eni SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bri Chem 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 Bri Chem Corp and Enterprise Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.