Correlation Between Unit and Galp Energa

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

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

Diversification Opportunities for Unit and Galp Energa

-0.19

Correlation Coefficient

Unit  Galp Energa

Good diversification

The 3 months correlation between Unit and Galp is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Unit Corp. and Galp Energa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energa and Unit 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 Unit Corporation 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 Unit i.e., Unit and Galp Energa go up and down completely randomly.

Pair Corralation between Unit and Galp Energa

Assuming the 90 days horizon Unit Corporation is expected to generate 9.92 times more return on investment than Galp Energa. However, Unit is 9.92 times more volatile than Galp Energa. It trades about 0.06 of its potential returns per unit of risk. Galp Energa is currently generating about -0.3 per unit of risk. If you would invest  55.00  in Unit Corporation on October 9, 2024 and sell it today you would earn a total of  0.00  from holding Unit Corporation or generate 0.0% return on investment over 90 days.

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

Unit Corp.  vs.  Galp Energa

Unit

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Unit Corporation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting fundamental indicators, Unit showed solid returns over the last few months and may actually be approaching a breakup point.

Galp Energa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galp Energa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Unit and Galp Energa

The main advantage of trading using opposite Unit and Galp Energa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Unit 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 Unit Corporation 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.