Correlation Between GALP ENERGADR/ and GALP ENERGIA

Can any of the company-specific risk be diversified away by investing in both GALP ENERGADR/ and GALP ENERGIA 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 GALP ENERGIA 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 GALP ENERGIA B , you can compare the effects of market volatilities on GALP ENERGADR/ and GALP ENERGIA 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 GALP ENERGIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of GALP ENERGADR/ and GALP ENERGIA.

Diversification Opportunities for GALP ENERGADR/ and GALP ENERGIA

0.95

Correlation Coefficient

GALP ENERGADR/  GALP ENERGIA

Almost no diversification

The 3 months correlation between GALP and GALP is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding GALP ENERGADR 15 and GALP ENERGIA B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GALP ENERGIA B 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 GALP ENERGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GALP ENERGIA B has no effect on the direction of GALP ENERGADR/ i.e., GALP ENERGADR/ and GALP ENERGIA go up and down completely randomly.

Pair Corralation between GALP ENERGADR/ and GALP ENERGIA

Assuming the 90 days trading horizon GALP ENERGADR 15 is expected to under-perform the GALP ENERGIA. But the stock apears to be less risky and, when comparing its historical volatility, GALP ENERGADR 15 is 1.11 times less risky than GALP ENERGIA. The stock trades about -0.05 of its potential returns per unit of risk. The GALP ENERGIA B is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,620  in GALP ENERGIA B on December 21, 2024 and sell it today you would lose (86.00) from holding GALP ENERGIA B or give up 5.31% of portfolio value over 90 days.

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

GALP ENERGADR 15  vs.  GALP ENERGIA B

GALP ENERGADR 15

Risk-Adjusted Performance

Very Weak

Over the last 90 days GALP ENERGADR 15 has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with GALP ENERGADR/ and GALP ENERGIA

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

The idea behind GALP ENERGADR 15 and GALP ENERGIA B 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.