Correlation Between VARIOUS EATERIES and Galp Energia

Can any of the company-specific risk be diversified away by investing in both VARIOUS EATERIES and Galp Energia 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 VARIOUS EATERIES and Galp Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VARIOUS EATERIES LS and Galp Energia SGPS, you can compare the effects of market volatilities on VARIOUS EATERIES and Galp Energia 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 VARIOUS EATERIES with a short position of Galp Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of VARIOUS EATERIES and Galp Energia.

Diversification Opportunities for VARIOUS EATERIES and Galp Energia

0.01

Correlation Coefficient

VARIOUS EATERIES  Galp Energia

Significant diversification

The 3 months correlation between VARIOUS and Galp is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding VARIOUS EATERIES LS and Galp Energia SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energia SGPS and VARIOUS EATERIES 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 VARIOUS EATERIES LS are associated (or correlated) with Galp Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galp Energia SGPS has no effect on the direction of VARIOUS EATERIES i.e., VARIOUS EATERIES and Galp Energia go up and down completely randomly.

Pair Corralation between VARIOUS EATERIES and Galp Energia

Assuming the 90 days horizon VARIOUS EATERIES LS is expected to under-perform the Galp Energia. But the stock apears to be less risky and, when comparing its historical volatility, VARIOUS EATERIES LS is 1.25 times less risky than Galp Energia. The stock trades about -0.13 of its potential returns per unit of risk. The Galp Energia SGPS is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  1,713  in Galp Energia SGPS on October 9, 2024 and sell it today you would lose (132.00) from holding Galp Energia SGPS or give up 7.71% of portfolio value over 90 days.

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

VARIOUS EATERIES LS  vs.  Galp Energia SGPS

VARIOUS EATERIES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VARIOUS EATERIES LS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Galp Energia SGPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galp Energia SGPS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with VARIOUS EATERIES and Galp Energia

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

The idea behind VARIOUS EATERIES LS and Galp Energia SGPS 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.