Correlation Between Galp Energa and Eneos Holdings

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

By analyzing existing cross correlation between Galp Energa and Eneos Holdings ADR, you can compare the effects of market volatilities on Galp Energa and Eneos Holdings 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 Eneos Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galp Energa and Eneos Holdings.

Diversification Opportunities for Galp Energa and Eneos Holdings

0.08

Correlation Coefficient

Galp Energa  Eneos Holdings

Significant diversification

The 3 months correlation between Galp and Eneos is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energa and Eneos Holdings ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eneos Holdings ADR 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 Eneos Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eneos Holdings ADR has no effect on the direction of Galp Energa i.e., Galp Energa and Eneos Holdings go up and down completely randomly.

Pair Corralation between Galp Energa and Eneos Holdings

Assuming the 90 days horizon Galp Energa is expected to generate 24.91 times less return on investment than Eneos Holdings. But when comparing it to its historical volatility, Galp Energa is 2.98 times less risky than Eneos Holdings. It trades about 0.01 of its potential returns per unit of risk. Eneos Holdings ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,051  in Eneos Holdings ADR on December 28, 2024 and sell it today you would earn a total of  179.00  from holding Eneos Holdings ADR or generate 17.03% return on investment over 90 days.

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

Galp Energa  vs.  Eneos Holdings ADR

Galp Energa

Risk-Adjusted Performance

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 fairly strong technical and fundamental indicators, Galp Energa is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Eneos Holdings ADR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eneos Holdings ADR are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Eneos Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Galp Energa and Eneos Holdings

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

The idea behind Galp Energa and Eneos Holdings ADR 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 Global Correlations module to find global opportunities by holding instruments from different markets.