Correlation Between Bri Chem and Saipem SpA

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

Diversification Opportunities for Bri Chem and Saipem SpA

-0.31

Correlation Coefficient

Bri Chem  Saipem SpA

Very good diversification

The 3 months correlation between Bri and Saipem is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Bri Chem Corp and Saipem SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Saipem SpA 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 Saipem SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Saipem SpA has no effect on the direction of Bri Chem i.e., Bri Chem and Saipem SpA go up and down completely randomly.

Pair Corralation between Bri Chem and Saipem SpA

Assuming the 90 days horizon Bri Chem Corp is expected to generate 3.03 times more return on investment than Saipem SpA. However, Bri Chem is 3.03 times more volatile than Saipem SpA. It trades about 0.08 of its potential returns per unit of risk. Saipem SpA is currently generating about 0.18 per unit of risk. If you would invest  25.00  in Bri Chem Corp on September 17, 2024 and sell it today you would earn a total of  5.00  from holding Bri Chem Corp or generate 20.0% return on investment over 90 days.

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

Bri Chem Corp  vs.  Saipem SpA

Bri Chem Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bri Chem Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Bri Chem reported solid returns over the last few months and may actually be approaching a breakup point.

Saipem SpA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saipem SpA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Saipem SpA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bri Chem and Saipem SpA

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

The idea behind Bri Chem Corp and Saipem SpA 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.