Correlation Between GALP ENERGADR and VITEC SOFTWARE

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

By analyzing existing cross correlation between GALP ENERGADR 15 and VITEC SOFTWARE GROUP, you can compare the effects of market volatilities on GALP ENERGADR and VITEC 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 ENERGADR with a short position of VITEC SOFTWARE. Check out your portfolio center. Please also check ongoing floating volatility patterns of GALP ENERGADR and VITEC SOFTWARE.

Diversification Opportunities for GALP ENERGADR and VITEC SOFTWARE

0.51

Correlation Coefficient

GALP ENERGADR  VITEC SOFTWARE

Very weak diversification

The 3 months correlation between GALP and VITEC is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding GALP ENERGADR 15 and VITEC SOFTWARE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VITEC SOFTWARE GROUP and GALP ENERGADR 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 ENERGADR 15 are associated (or correlated) with VITEC SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VITEC SOFTWARE GROUP has no effect on the direction of GALP ENERGADR i.e., GALP ENERGADR and VITEC SOFTWARE go up and down completely randomly.

Pair Corralation between GALP ENERGADR and VITEC SOFTWARE

Assuming the 90 days trading horizon GALP ENERGADR is expected to generate 1.97 times less return on investment than VITEC SOFTWARE. But when comparing it to its historical volatility, GALP ENERGADR 15 is 1.68 times less risky than VITEC SOFTWARE. It trades about 0.08 of its potential returns per unit of risk. VITEC SOFTWARE GROUP is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,636  in VITEC SOFTWARE GROUP on October 26, 2024 and sell it today you would earn a total of  208.00  from holding VITEC SOFTWARE GROUP or generate 4.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.74%
Values	Daily Returns

GALP ENERGADR 15  vs.  VITEC SOFTWARE GROUP

GALP ENERGADR 15

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GALP ENERGADR 15 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, GALP ENERGADR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

VITEC SOFTWARE GROUP

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VITEC SOFTWARE GROUP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, VITEC SOFTWARE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GALP ENERGADR and VITEC SOFTWARE

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

The idea behind GALP ENERGADR 15 and VITEC SOFTWARE GROUP 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.