Correlation Between Eni SpA and Galp Energa
Can any of the company-specific risk be diversified away by investing in both Eni SpA 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 Eni SpA and Galp Energa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eni SpA and Galp Energa, you can compare the effects of market volatilities on Eni SpA 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 Eni SpA with a short position of Galp Energa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eni SpA and Galp Energa.
Diversification Opportunities for Eni SpA and Galp Energa
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Eni and Galp is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Eni SpA and Galp Energa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energa and Eni SpA 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 Eni SpA 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 Eni SpA i.e., Eni SpA and Galp Energa go up and down completely randomly.
Pair Corralation between Eni SpA and Galp Energa
Assuming the 90 days horizon Eni SpA is expected to generate 2.32 times more return on investment than Galp Energa. However, Eni SpA is 2.32 times more volatile than Galp Energa. It trades about 0.05 of its potential returns per unit of risk. Galp Energa is currently generating about 0.04 per unit of risk. If you would invest 1,178 in Eni SpA on November 4, 2024 and sell it today you would earn a total of 257.00 from holding Eni SpA or generate 21.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 76.52% |
| Values | Daily Returns |
Eni SpA vs. Galp Energa
Performance |
| Timeline |
| Eni SpA |
| Galp Energa |
Eni SpA and Galp Energa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eni SpA and Galp Energa
The main advantage of trading using opposite Eni SpA and Galp Energa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eni SpA 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 Eni SpA 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.| Galp Energa vs. Eni SpA | Galp Energa vs. MOL PLC ADR | Galp Energa vs. PetroChina Co Ltd | Galp Energa vs. Equinor ASA |
Check out your portfolio center.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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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