Correlation Between Galp Energia and Galp Energa

Can any of the company-specific risk be diversified away by investing in both Galp Energia 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 Galp Energia and Galp Energa 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 Galp Energa, you can compare the effects of market volatilities on Galp Energia 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 Galp Energia with a short position of Galp Energa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galp Energia and Galp Energa.

Diversification Opportunities for Galp Energia and Galp Energa

0.85

Correlation Coefficient

Galp Energia  Galp Energa

Very poor diversification

The 3 months correlation between Galp and Galp is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energia SGPS and Galp Energa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energa 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 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 Galp Energia i.e., Galp Energia and Galp Energa go up and down completely randomly.

Pair Corralation between Galp Energia and Galp Energa

Assuming the 90 days horizon Galp Energia SGPS is expected to under-perform the Galp Energa. In addition to that, Galp Energia is 1.8 times more volatile than Galp Energa. It trades about -0.14 of its total potential returns per unit of risk. Galp Energa is currently generating about -0.2 per unit of volatility. If you would invest  990.00  in Galp Energa on September 3, 2024 and sell it today you would lose (173.00) from holding Galp Energa or give up 17.47% of portfolio value over 90 days.

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

Galp Energia SGPS  vs.  Galp Energa

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 weak performance in the last few months, the Stock's technical and fundamental 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 Energa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galp Energa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Galp Energia and Galp Energa

The main advantage of trading using opposite Galp Energia and Galp Energa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galp Energia 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.

The idea behind Galp Energia SGPS and Galp Energa 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.