Correlation Between GALP ENERGIA and Vishay Intertechnology

Can any of the company-specific risk be diversified away by investing in both GALP ENERGIA and Vishay Intertechnology 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 Vishay Intertechnology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GALP ENERGIA B and Vishay Intertechnology, you can compare the effects of market volatilities on GALP ENERGIA and Vishay Intertechnology 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 Vishay Intertechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of GALP ENERGIA and Vishay Intertechnology.

Diversification Opportunities for GALP ENERGIA and Vishay Intertechnology

0.0

Correlation Coefficient

GALP ENERGIA  Vishay Intertechnology

Pay attention - limited upside

The 3 months correlation between GALP and Vishay is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding GALP ENERGIA B and Vishay Intertechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vishay Intertechnology 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 B are associated (or correlated) with Vishay Intertechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vishay Intertechnology has no effect on the direction of GALP ENERGIA i.e., GALP ENERGIA and Vishay Intertechnology go up and down completely randomly.

Pair Corralation between GALP ENERGIA and Vishay Intertechnology

Assuming the 90 days trading horizon GALP ENERGIA B is expected to under-perform the Vishay Intertechnology. But the stock apears to be less risky and, when comparing its historical volatility, GALP ENERGIA B is 1.05 times less risky than Vishay Intertechnology. The stock trades about -0.03 of its potential returns per unit of risk. The Vishay Intertechnology is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,632  in Vishay Intertechnology on December 21, 2024 and sell it today you would lose (81.00) from holding Vishay Intertechnology or give up 4.96% of portfolio value over 90 days.

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

GALP ENERGIA B   vs.  Vishay Intertechnology

GALP ENERGIA B

Risk-Adjusted Performance

Very Weak

Over the last 90 days GALP ENERGIA B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GALP ENERGIA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Vishay Intertechnology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vishay Intertechnology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vishay Intertechnology is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GALP ENERGIA and Vishay Intertechnology

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

The idea behind GALP ENERGIA B and Vishay Intertechnology 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.