Correlation Between VITEC SOFTWARE and GALP ENERGADR

Can any of the company-specific risk be diversified away by investing in both VITEC SOFTWARE and GALP ENERGADR 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 VITEC SOFTWARE and GALP ENERGADR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between VITEC SOFTWARE GROUP and GALP ENERGADR 15, you can compare the effects of market volatilities on VITEC SOFTWARE and GALP ENERGADR 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 VITEC SOFTWARE with a short position of GALP ENERGADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of VITEC SOFTWARE and GALP ENERGADR.

Diversification Opportunities for VITEC SOFTWARE and GALP ENERGADR

0.53

Correlation Coefficient

VITEC SOFTWARE  GALP ENERGADR

Very weak diversification

The 3 months correlation between VITEC and GALP is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding VITEC SOFTWARE GROUP and GALP ENERGADR 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GALP ENERGADR 15 and VITEC SOFTWARE 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 VITEC SOFTWARE GROUP are associated (or correlated) with GALP ENERGADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GALP ENERGADR 15 has no effect on the direction of VITEC SOFTWARE i.e., VITEC SOFTWARE and GALP ENERGADR go up and down completely randomly.

Pair Corralation between VITEC SOFTWARE and GALP ENERGADR

Assuming the 90 days horizon VITEC SOFTWARE is expected to generate 1.41 times less return on investment than GALP ENERGADR. In addition to that, VITEC SOFTWARE is 1.09 times more volatile than GALP ENERGADR 15. It trades about 0.03 of its total potential returns per unit of risk. GALP ENERGADR 15 is currently generating about 0.05 per unit of volatility. If you would invest  548.00  in GALP ENERGADR 15 on October 26, 2024 and sell it today you would earn a total of  257.00  from holding GALP ENERGADR 15 or generate 46.9% return on investment over 90 days.

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

VITEC SOFTWARE GROUP  vs.  GALP ENERGADR 15

VITEC SOFTWARE GROUP

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VITEC SOFTWARE GROUP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, VITEC SOFTWARE reported solid returns over the last few months and may actually be approaching a breakup point.

GALP ENERGADR 15

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GALP ENERGADR 15 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GALP ENERGADR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with VITEC SOFTWARE and GALP ENERGADR

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

The idea behind VITEC SOFTWARE GROUP and GALP ENERGADR 15 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.