Correlation Between Galp Energa and Eni SpA

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

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

Diversification Opportunities for Galp Energa and Eni SpA

-0.19

Correlation Coefficient

Galp Energa  Eni SpA

Good diversification

The 3 months correlation between Galp and Eni is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energa and Eni SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA and Galp Energa 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 Energa are associated (or correlated) with Eni SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eni SpA has no effect on the direction of Galp Energa i.e., Galp Energa and Eni SpA go up and down completely randomly.

Pair Corralation between Galp Energa and Eni SpA

Assuming the 90 days horizon Galp Energa is expected to generate 0.53 times more return on investment than Eni SpA. However, Galp Energa is 1.87 times less risky than Eni SpA. It trades about -0.07 of its potential returns per unit of risk. Eni SpA is currently generating about -0.06 per unit of risk. If you would invest  947.00  in Galp Energa on September 12, 2024 and sell it today you would lose (70.00) from holding Galp Energa or give up 7.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Galp Energa  vs.  Eni SpA

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 latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Eni SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eni SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Galp Energa and Eni SpA

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

The idea behind Galp Energa and Eni SpA 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..