Correlation Between Saipem SpA and Black Mountain

Can any of the company-specific risk be diversified away by investing in both Saipem SpA and Black Mountain 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 Saipem SpA and Black Mountain into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Saipem SpA and Black Mountain Acquisition, you can compare the effects of market volatilities on Saipem SpA and Black Mountain 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 Saipem SpA with a short position of Black Mountain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saipem SpA and Black Mountain.

Diversification Opportunities for Saipem SpA and Black Mountain

0.87

Correlation Coefficient

Saipem SpA  Black Mountain

Very poor diversification

The 3 months correlation between Saipem and Black is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Saipem SpA and Black Mountain Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Mountain Acqui and Saipem 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 Saipem SpA are associated (or correlated) with Black Mountain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Mountain Acqui has no effect on the direction of Saipem SpA i.e., Saipem SpA and Black Mountain go up and down completely randomly.

Pair Corralation between Saipem SpA and Black Mountain

If you would invest  221.00  in Saipem SpA on September 29, 2024 and sell it today you would earn a total of  35.00  from holding Saipem SpA or generate 15.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.59%
Values	Daily Returns

Saipem SpA  vs.  Black Mountain Acquisition

Saipem SpA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saipem SpA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent primary indicators, Saipem SpA reported solid returns over the last few months and may actually be approaching a breakup point.

Black Mountain Acqui

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Mountain Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Black Mountain is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Saipem SpA and Black Mountain

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

The idea behind Saipem SpA and Black Mountain Acquisition 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.