Correlation Between Galp Energia and Easy Software

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

Diversification Opportunities for Galp Energia and Easy Software

0.21

Correlation Coefficient

Galp Energia  Easy Software

Modest diversification

The 3 months correlation between Galp and Easy is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energia SGPS and Easy Software AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Easy Software AG 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 Easy Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Easy Software AG has no effect on the direction of Galp Energia i.e., Galp Energia and Easy Software go up and down completely randomly.

Pair Corralation between Galp Energia and Easy Software

Assuming the 90 days horizon Galp Energia is expected to generate 2.95 times less return on investment than Easy Software. But when comparing it to its historical volatility, Galp Energia SGPS is 2.3 times less risky than Easy Software. It trades about 0.13 of its potential returns per unit of risk. Easy Software AG is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,460  in Easy Software AG on October 25, 2024 and sell it today you would earn a total of  340.00  from holding Easy Software AG or generate 23.29% return on investment over 90 days.

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

Galp Energia SGPS  vs.  Easy Software AG

Galp Energia SGPS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Galp Energia SGPS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Galp Energia is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Easy Software AG

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Easy Software AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Easy Software displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Galp Energia and Easy Software

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

The idea behind Galp Energia SGPS and Easy Software AG 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.