Correlation Between Galp Energia and SWISS WATER

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

Diversification Opportunities for Galp Energia and SWISS WATER

-0.43

Correlation Coefficient

Galp Energia  SWISS WATER

Very good diversification

The 3 months correlation between Galp and SWISS is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energia SGPS and SWISS WATER DECAFFCOFFEE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWISS WATER DECAFFCOFFEE 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 SWISS WATER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWISS WATER DECAFFCOFFEE has no effect on the direction of Galp Energia i.e., Galp Energia and SWISS WATER go up and down completely randomly.

Pair Corralation between Galp Energia and SWISS WATER

Assuming the 90 days horizon Galp Energia SGPS is expected to under-perform the SWISS WATER. But the stock apears to be less risky and, when comparing its historical volatility, Galp Energia SGPS is 2.56 times less risky than SWISS WATER. The stock trades about -0.22 of its potential returns per unit of risk. The SWISS WATER DECAFFCOFFEE is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  262.00  in SWISS WATER DECAFFCOFFEE on October 9, 2024 and sell it today you would lose (12.00) from holding SWISS WATER DECAFFCOFFEE or give up 4.58% of portfolio value over 90 days.

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

Galp Energia SGPS  vs.  SWISS WATER DECAFFCOFFEE

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 latest fragile 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.

SWISS WATER DECAFFCOFFEE

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SWISS WATER DECAFFCOFFEE are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SWISS WATER may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Galp Energia and SWISS WATER

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

The idea behind Galp Energia SGPS and SWISS WATER DECAFFCOFFEE 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.