Correlation Between OMV AG and Eni SPA

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

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

Diversification Opportunities for OMV AG and Eni SPA

0.8

Correlation Coefficient

OMV AG  Eni SPA

Very poor diversification

The 3 months correlation between OMV and Eni is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding OMV AG PK 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 OMV AG 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 OMV AG PK 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 OMV AG i.e., OMV AG and Eni SPA go up and down completely randomly.

Pair Corralation between OMV AG and Eni SPA

Assuming the 90 days horizon OMV AG PK is expected to generate 1.13 times more return on investment than Eni SPA. However, OMV AG is 1.13 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 -0.12 per unit of risk. If you would invest  1,011  in OMV AG PK on September 16, 2024 and sell it today you would lose (25.00) from holding OMV AG PK or give up 2.47% of portfolio value over 90 days.

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

OMV AG PK  vs.  Eni SpA ADR

OMV AG PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OMV AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, OMV AG is not utilizing all of its potentials. The latest 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 OMV AG and Eni SPA

The main advantage of trading using opposite OMV AG and Eni SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OMV AG 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 OMV AG PK 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.