Correlation Between Petrleo Brasileiro and Galp Energa

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

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

Diversification Opportunities for Petrleo Brasileiro and Galp Energa

0.05

Correlation Coefficient

Petrleo Brasileiro  Galp Energa

Significant diversification

The 3 months correlation between Petrleo and Galp is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Petrleo Brasileiro SA and Galp Energa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energa and Petrleo Brasileiro 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 Petrleo Brasileiro SA are associated (or correlated) with Galp Energa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galp Energa has no effect on the direction of Petrleo Brasileiro i.e., Petrleo Brasileiro and Galp Energa go up and down completely randomly.

Pair Corralation between Petrleo Brasileiro and Galp Energa

Assuming the 90 days horizon Petrleo Brasileiro SA is expected to generate 0.78 times more return on investment than Galp Energa. However, Petrleo Brasileiro SA is 1.28 times less risky than Galp Energa. It trades about 0.12 of its potential returns per unit of risk. Galp Energa is currently generating about 0.01 per unit of risk. If you would invest  1,173  in Petrleo Brasileiro SA on December 29, 2024 and sell it today you would earn a total of  132.00  from holding Petrleo Brasileiro SA or generate 11.25% return on investment over 90 days.

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

Petrleo Brasileiro SA  vs.  Galp Energa

Petrleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petrleo Brasileiro SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Petrleo Brasileiro may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Galp Energa

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Galp Energa are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Galp Energa is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Petrleo Brasileiro and Galp Energa

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

The idea behind Petrleo Brasileiro SA and Galp Energa 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.