Correlation Between Galp Energa and OMV AG

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

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

Diversification Opportunities for Galp Energa and OMV AG

0.54

Correlation Coefficient

Galp Energa  OMV AG

Very weak diversification

The 3 months correlation between Galp and OMV is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energa and OMV AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OMV AG PK 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 OMV AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OMV AG PK has no effect on the direction of Galp Energa i.e., Galp Energa and OMV AG go up and down completely randomly.

Pair Corralation between Galp Energa and OMV AG

Assuming the 90 days horizon Galp Energa is expected to under-perform the OMV AG. In addition to that, Galp Energa is 1.26 times more volatile than OMV AG PK. It trades about -0.06 of its total potential returns per unit of risk. OMV AG PK is currently generating about -0.01 per unit of volatility. If you would invest  1,011  in OMV AG PK on September 14, 2024 and sell it today you would lose (14.00) from holding OMV AG PK or give up 1.38% of portfolio value over 90 days.

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

Galp Energa  vs.  OMV AG PK

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 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.

OMV AG PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days OMV AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, OMV AG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Galp Energa and OMV AG

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

The idea behind Galp Energa and OMV AG PK 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.