Correlation Between Galp Energia and Benfica

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

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

Diversification Opportunities for Galp Energia and Benfica

-0.22

Correlation Coefficient

Galp Energia  Benfica

Very good diversification

The 3 months correlation between Galp and Benfica is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energia SGPS and Benfica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benfica and Galp Energia 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 Galp Energia SGPS are associated (or correlated) with Benfica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benfica has no effect on the direction of Galp Energia i.e., Galp Energia and Benfica go up and down completely randomly.

Pair Corralation between Galp Energia and Benfica

Assuming the 90 days trading horizon Galp Energia SGPS is expected to under-perform the Benfica. In addition to that, Galp Energia is 1.07 times more volatile than Benfica. It trades about -0.02 of its total potential returns per unit of risk. Benfica is currently generating about 0.02 per unit of volatility. If you would invest  320.00  in Benfica on December 29, 2024 and sell it today you would earn a total of  3.00  from holding Benfica or generate 0.94% return on investment over 90 days.

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

Galp Energia SGPS  vs.  Benfica

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.

Benfica

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Benfica are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Benfica is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Galp Energia and Benfica

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

The idea behind Galp Energia SGPS and Benfica 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.