Correlation Between Saipem SpA and Recon Technology

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

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

Diversification Opportunities for Saipem SpA and Recon Technology

-0.52

Correlation Coefficient

Saipem SpA  Recon Technology

Excellent diversification

The 3 months correlation between Saipem and Recon is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Saipem SpA and Recon Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Recon Technology 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 Recon Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Recon Technology has no effect on the direction of Saipem SpA i.e., Saipem SpA and Recon Technology go up and down completely randomly.

Pair Corralation between Saipem SpA and Recon Technology

Assuming the 90 days horizon Saipem SpA is expected to generate 0.5 times more return on investment than Recon Technology. However, Saipem SpA is 2.02 times less risky than Recon Technology. It trades about 0.07 of its potential returns per unit of risk. Recon Technology is currently generating about -0.02 per unit of risk. If you would invest  231.00  in Saipem SpA on September 3, 2024 and sell it today you would earn a total of  25.00  from holding Saipem SpA or generate 10.82% return on investment over 90 days.

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

Saipem SpA  vs.  Recon Technology

Saipem SpA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Saipem SpA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Saipem SpA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Recon Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Recon Technology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Recon Technology is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Saipem SpA and Recon Technology

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

The idea behind Saipem SpA and Recon Technology 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.