Correlation Between Origin Energy and Eni SPA

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

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

Diversification Opportunities for Origin Energy and Eni SPA

-0.43

Correlation Coefficient

Origin Energy  Eni SPA

Very good diversification

The 3 months correlation between Origin and Eni is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Origin Energy Ltd 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 Origin Energy 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 Origin Energy Ltd 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 Origin Energy i.e., Origin Energy and Eni SPA go up and down completely randomly.

Pair Corralation between Origin Energy and Eni SPA

Assuming the 90 days horizon Origin Energy Ltd is expected to generate 3.35 times more return on investment than Eni SPA. However, Origin Energy is 3.35 times more volatile than Eni SpA ADR. It trades about -0.03 of its potential returns per unit of risk. Eni SpA ADR is currently generating about -0.29 per unit of risk. If you would invest  663.00  in Origin Energy Ltd on September 16, 2024 and sell it today you would lose (13.00) from holding Origin Energy Ltd or give up 1.96% of portfolio value over 90 days.

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

Origin Energy Ltd  vs.  Eni SpA ADR

Origin Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Energy Ltd are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Origin Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eni SpA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eni SpA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Origin Energy and Eni SPA

The main advantage of trading using opposite Origin Energy and Eni SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Energy 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 Origin Energy Ltd 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.