Correlation Between MetLife and Galp Energia

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

By analyzing existing cross correlation between MetLife and Galp Energia SGPS, you can compare the effects of market volatilities on MetLife 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 MetLife with a short position of Galp Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of MetLife and Galp Energia.

Diversification Opportunities for MetLife and Galp Energia

-0.02

Correlation Coefficient

MetLife  Galp Energia

Good diversification

The 3 months correlation between MetLife and Galp is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding MetLife and Galp Energia SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energia SGPS and MetLife 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 MetLife 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 SGPS has no effect on the direction of MetLife i.e., MetLife and Galp Energia go up and down completely randomly.

Pair Corralation between MetLife and Galp Energia

Considering the 90-day investment horizon MetLife is expected to generate 2.71 times less return on investment than Galp Energia. But when comparing it to its historical volatility, MetLife is 2.6 times less risky than Galp Energia. It trades about 0.07 of its potential returns per unit of risk. Galp Energia SGPS is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,018  in Galp Energia SGPS on December 2, 2024 and sell it today you would earn a total of  632.00  from holding Galp Energia SGPS or generate 62.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	48.48%
Values	Daily Returns

MetLife  vs.  Galp Energia SGPS

MetLife

Risk-Adjusted Performance

Very Weak

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

Galp Energia SGPS

Risk-Adjusted Performance

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 nearly stable technical and fundamental indicators, Galp Energia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MetLife and Galp Energia

The main advantage of trading using opposite MetLife and Galp Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MetLife 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 MetLife and Galp Energia SGPS 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.