Correlation Between Altri SGPS and Galp Energia

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

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

Diversification Opportunities for Altri SGPS and Galp Energia

-0.69

Correlation Coefficient

Altri SGPS  Galp Energia

Excellent diversification

The 3 months correlation between Altri and Galp is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Altri SGPS SA 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 Altri SGPS 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 Altri SGPS SA 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 Altri SGPS i.e., Altri SGPS and Galp Energia go up and down completely randomly.

Pair Corralation between Altri SGPS and Galp Energia

Assuming the 90 days trading horizon Altri SGPS SA is expected to generate 0.66 times more return on investment than Galp Energia. However, Altri SGPS SA is 1.51 times less risky than Galp Energia. It trades about 0.17 of its potential returns per unit of risk. Galp Energia SGPS is currently generating about -0.02 per unit of risk. If you would invest  530.00  in Altri SGPS SA on December 30, 2024 and sell it today you would earn a total of  73.00  from holding Altri SGPS SA or generate 13.77% return on investment over 90 days.

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

Altri SGPS SA  vs.  Galp Energia SGPS

Altri SGPS SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altri SGPS SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Altri SGPS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Galp Energia SGPS

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Altri SGPS and Galp Energia

The main advantage of trading using opposite Altri SGPS and Galp Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Altri SGPS 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 Altri SGPS SA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.