Correlation Between Saipem SpA and Powerstorm Holdings

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

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

Diversification Opportunities for Saipem SpA and Powerstorm Holdings

-0.85

Correlation Coefficient

Saipem SpA  Powerstorm Holdings

Pay attention - limited upside

The 3 months correlation between Saipem and Powerstorm is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Saipem SpA and Powerstorm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powerstorm Holdings 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 Powerstorm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powerstorm Holdings has no effect on the direction of Saipem SpA i.e., Saipem SpA and Powerstorm Holdings go up and down completely randomly.

Pair Corralation between Saipem SpA and Powerstorm Holdings

Assuming the 90 days horizon Saipem SpA is expected to generate 0.18 times more return on investment than Powerstorm Holdings. However, Saipem SpA is 5.48 times less risky than Powerstorm Holdings. It trades about 0.16 of its potential returns per unit of risk. Powerstorm Holdings is currently generating about -0.03 per unit of risk. If you would invest  221.00  in Saipem SpA on September 22, 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 Against
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Saipem SpA  vs.  Powerstorm Holdings

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.

Powerstorm Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Powerstorm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Saipem SpA and Powerstorm Holdings

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

The idea behind Saipem SpA and Powerstorm Holdings 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.