Correlation Between Saipem SpA and Dril Quip

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

By analyzing existing cross correlation between Saipem SpA and Dril Quip, you can compare the effects of market volatilities on Saipem SpA and Dril Quip 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 Dril Quip. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saipem SpA and Dril Quip.

Diversification Opportunities for Saipem SpA and Dril Quip

-0.83

Correlation Coefficient

Saipem SpA  Dril Quip

Pay attention - limited upside

The 3 months correlation between Saipem and Dril is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Saipem SpA and Dril Quip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dril Quip 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 Dril Quip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dril Quip has no effect on the direction of Saipem SpA i.e., Saipem SpA and Dril Quip go up and down completely randomly.

Pair Corralation between Saipem SpA and Dril Quip

Assuming the 90 days horizon Saipem SpA is expected to generate 0.86 times more return on investment than Dril Quip. However, Saipem SpA is 1.17 times less risky than Dril Quip. It trades about 0.01 of its potential returns per unit of risk. Dril Quip is currently generating about -0.08 per unit of risk. If you would invest  256.00  in Saipem SpA on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Saipem SpA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	39.68%
Values	Daily Returns

Saipem SpA  vs.  Dril Quip

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.

Dril Quip

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dril Quip has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Dril Quip is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Saipem SpA and Dril Quip

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

The idea behind Saipem SpA and Dril Quip 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.