Correlation Between Saipem SpA and Subsea 7

Can any of the company-specific risk be diversified away by investing in both Saipem SpA and Subsea 7 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 Subsea 7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Saipem SpA and Subsea 7 SA, you can compare the effects of market volatilities on Saipem SpA and Subsea 7 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 Subsea 7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Saipem SpA and Subsea 7.

Diversification Opportunities for Saipem SpA and Subsea 7

0.25

Correlation Coefficient

Saipem SpA  Subsea 7

Modest diversification

The 3 months correlation between Saipem and Subsea is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Saipem SpA and Subsea 7 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Subsea 7 SA 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 Subsea 7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Subsea 7 SA has no effect on the direction of Saipem SpA i.e., Saipem SpA and Subsea 7 go up and down completely randomly.

Pair Corralation between Saipem SpA and Subsea 7

If you would invest  198.00  in Saipem SpA on September 17, 2024 and sell it today you would earn a total of  58.00  from holding Saipem SpA or generate 29.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Saipem SpA  vs.  Subsea 7 SA

Saipem SpA

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Saipem SpA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak primary indicators, Saipem SpA reported solid returns over the last few months and may actually be approaching a breakup point.

Subsea 7 SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Subsea 7 SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Subsea 7 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Saipem SpA and Subsea 7

The main advantage of trading using opposite Saipem SpA and Subsea 7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Saipem SpA position performs unexpectedly, Subsea 7 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 Subsea 7 will offset losses from the drop in Subsea 7's long position.

The idea behind Saipem SpA and Subsea 7 SA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.