Correlation Between BP Plc and Galp Energa
Can any of the company-specific risk be diversified away by investing in both BP Plc and Galp Energa 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 BP Plc and Galp Energa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP plc and Galp Energa, you can compare the effects of market volatilities on BP Plc and Galp Energa 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 BP Plc with a short position of Galp Energa. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Plc and Galp Energa.
Diversification Opportunities for BP Plc and Galp Energa
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BPAQF and Galp is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding BP plc and Galp Energa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energa and BP Plc 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 BP plc are associated (or correlated) with Galp Energa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galp Energa has no effect on the direction of BP Plc i.e., BP Plc and Galp Energa go up and down completely randomly.
Pair Corralation between BP Plc and Galp Energa
Assuming the 90 days horizon BP plc is expected to generate 1.09 times more return on investment than Galp Energa. However, BP Plc is 1.09 times more volatile than Galp Energa. It trades about 0.09 of its potential returns per unit of risk. Galp Energa is currently generating about -0.04 per unit of risk. If you would invest 490.00 in BP plc on December 4, 2024 and sell it today you would earn a total of 45.00 from holding BP plc or generate 9.18% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
BP plc vs. Galp Energa
Performance |
Timeline |
BP plc |
Galp Energa |
BP Plc and Galp Energa Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BP Plc and Galp Energa
The main advantage of trading using opposite BP Plc and Galp Energa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Plc position performs unexpectedly, Galp Energa 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 Energa will offset losses from the drop in Galp Energa's long position.BP Plc vs. Unit Corporation | BP Plc vs. Galp Energa | BP Plc vs. Ecopetrol SA ADR | BP Plc vs. Equinor ASA ADR |
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Check out your portfolio center.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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