Correlation Between Equinor ASA and Galp Energia
Can any of the company-specific risk be diversified away by investing in both Equinor ASA 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 Equinor ASA and Galp Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinor ASA ADR and Galp Energia SGPS, you can compare the effects of market volatilities on Equinor ASA 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 Equinor ASA with a short position of Galp Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Galp Energia.
Diversification Opportunities for Equinor ASA and Galp Energia
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Equinor and Galp is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA ADR 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 Equinor ASA 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 Equinor ASA ADR 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 Equinor ASA i.e., Equinor ASA and Galp Energia go up and down completely randomly.
Pair Corralation between Equinor ASA and Galp Energia
Given the investment horizon of 90 days Equinor ASA ADR is expected to under-perform the Galp Energia. But the stock apears to be less risky and, when comparing its historical volatility, Equinor ASA ADR is 2.17 times less risky than Galp Energia. The stock trades about -0.01 of its potential returns per unit of risk. The Galp Energia SGPS is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,523 in Galp Energia SGPS on August 28, 2024 and sell it today you would earn a total of 102.00 from holding Galp Energia SGPS or generate 6.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 77.51% |
| Values | Daily Returns |
Equinor ASA ADR vs. Galp Energia SGPS
Performance |
| Timeline |
| Equinor ASA ADR |
| Galp Energia SGPS |
Equinor ASA and Galp Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Galp Energia
The main advantage of trading using opposite Equinor ASA and Galp Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA 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 Equinor ASA ADR 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.| Galp Energia vs. Galp Energa | Galp Energia vs. Equinor ASA | Galp Energia vs. TotalEnergies SE | Galp Energia vs. Eneos Holdings ADR |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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