Correlation Between Eni SPA and Centrus Energy

Can any of the company-specific risk be diversified away by investing in both Eni SPA and Centrus Energy 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 Eni SPA and Centrus Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eni SpA ADR and Centrus Energy, you can compare the effects of market volatilities on Eni SPA and Centrus Energy 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 Eni SPA with a short position of Centrus Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SPA and Centrus Energy.

Diversification Opportunities for Eni SPA and Centrus Energy

-0.05

Correlation Coefficient

Eni SPA  Centrus Energy

Good diversification

The 3 months correlation between Eni and Centrus is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA ADR and Centrus Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrus Energy and Eni 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 Eni SpA ADR are associated (or correlated) with Centrus Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrus Energy has no effect on the direction of Eni SPA i.e., Eni SPA and Centrus Energy go up and down completely randomly.

Pair Corralation between Eni SPA and Centrus Energy

Taking into account the 90-day investment horizon Eni SpA ADR is expected to under-perform the Centrus Energy. But the stock apears to be less risky and, when comparing its historical volatility, Eni SpA ADR is 1.89 times less risky than Centrus Energy. The stock trades about -0.12 of its potential returns per unit of risk. The Centrus Energy is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  7,196  in Centrus Energy on January 12, 2025 and sell it today you would lose (762.00) from holding Centrus Energy or give up 10.59% of portfolio value over 90 days.

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

Eni SpA ADR  vs.  Centrus Energy

Eni SpA ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eni SpA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Eni SPA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Centrus Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centrus Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Centrus Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eni SPA and Centrus Energy

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

The idea behind Eni SpA ADR and Centrus Energy 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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.