Correlation Between TOREX SEMICONDUCTOR and Galp Energia

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

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

Diversification Opportunities for TOREX SEMICONDUCTOR and Galp Energia

0.6

Correlation Coefficient

TOREX SEMICONDUCTOR  Galp Energia

Poor diversification

The 3 months correlation between TOREX and Galp is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding TOREX SEMICONDUCTOR LTD 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 TOREX SEMICONDUCTOR 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 TOREX SEMICONDUCTOR LTD 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 TOREX SEMICONDUCTOR i.e., TOREX SEMICONDUCTOR and Galp Energia go up and down completely randomly.

Pair Corralation between TOREX SEMICONDUCTOR and Galp Energia

Assuming the 90 days horizon TOREX SEMICONDUCTOR LTD is expected to under-perform the Galp Energia. In addition to that, TOREX SEMICONDUCTOR is 1.18 times more volatile than Galp Energia SGPS. It trades about -0.21 of its total potential returns per unit of risk. Galp Energia SGPS is currently generating about -0.02 per unit of volatility. If you would invest  1,745  in Galp Energia SGPS on September 19, 2024 and sell it today you would lose (49.00) from holding Galp Energia SGPS or give up 2.81% of portfolio value over 90 days.

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

TOREX SEMICONDUCTOR LTD  vs.  Galp Energia SGPS

TOREX SEMICONDUCTOR LTD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TOREX SEMICONDUCTOR LTD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing 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 nearly stable basic indicators, Galp Energia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TOREX SEMICONDUCTOR and Galp Energia

The main advantage of trading using opposite TOREX SEMICONDUCTOR and Galp Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TOREX SEMICONDUCTOR 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 TOREX SEMICONDUCTOR LTD 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.