Correlation Between ATT and Galp Energia

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

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

Diversification Opportunities for ATT and Galp Energia

-0.38

Correlation Coefficient

ATT  Galp Energia

Very good diversification

The 3 months correlation between ATT and Galp is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding ATT Inc 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 ATT 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 ATT Inc 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 ATT i.e., ATT and Galp Energia go up and down completely randomly.

Pair Corralation between ATT and Galp Energia

Taking into account the 90-day investment horizon ATT Inc is expected to generate 0.44 times more return on investment than Galp Energia. However, ATT Inc is 2.28 times less risky than Galp Energia. It trades about 0.21 of its potential returns per unit of risk. Galp Energia SGPS is currently generating about 0.03 per unit of risk. If you would invest  2,267  in ATT Inc on December 25, 2024 and sell it today you would earn a total of  464.00  from holding ATT Inc or generate 20.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

ATT Inc  vs.  Galp Energia SGPS

ATT Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ATT Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, ATT unveiled solid returns over the last few months and may actually be approaching a breakup point.

Galp Energia SGPS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Galp Energia SGPS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 ATT and Galp Energia

The main advantage of trading using opposite ATT and Galp Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATT 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 ATT Inc 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.