Correlation Between Eni SPA and PHX Energy

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

By analyzing existing cross correlation between Enterprise Group and PHX Energy Services, you can compare the effects of market volatilities on Eni SPA and PHX Energy 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 PHX Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and PHX Energy.

Diversification Opportunities for Eni SPA and PHX Energy

0.26

Correlation Coefficient

Eni SPA  PHX Energy

Modest diversification

The 3 months correlation between Eni and PHX is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Group and PHX Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHX Energy Services 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 Enterprise Group are associated (or correlated) with PHX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHX Energy Services has no effect on the direction of Eni SPA i.e., Eni SPA and PHX Energy go up and down completely randomly.

Pair Corralation between Eni SPA and PHX Energy

Given the investment horizon of 90 days Enterprise Group is expected to generate 4.81 times more return on investment than PHX Energy. However, Eni SPA is 4.81 times more volatile than PHX Energy Services. It trades about 0.14 of its potential returns per unit of risk. PHX Energy Services is currently generating about -0.03 per unit of risk. If you would invest  102.00  in Enterprise Group on September 21, 2024 and sell it today you would earn a total of  77.00  from holding Enterprise Group or generate 75.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Enterprise Group  vs.  PHX Energy Services

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 unfluctuating basic indicators, Eni SPA displayed solid returns over the last few months and may actually be approaching a breakup point.

PHX Energy Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PHX Energy Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PHX Energy is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Eni SPA and PHX Energy

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

The idea behind Enterprise Group and PHX Energy Services 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.