Correlation Between Galp Energia and Eni SPA
Can any of the company-specific risk be diversified away by investing in both Galp Energia and Eni SPA 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 Galp Energia and Eni SPA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Galp Energia SGPS and Eni SpA ADR, you can compare the effects of market volatilities on Galp Energia and Eni SPA 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 Galp Energia with a short position of Eni SPA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galp Energia and Eni SPA.
Diversification Opportunities for Galp Energia and Eni SPA
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Galp and Eni is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energia SGPS and Eni SpA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eni SpA ADR and Galp Energia 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 Galp Energia SGPS are associated (or correlated) with Eni SPA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eni SpA ADR has no effect on the direction of Galp Energia i.e., Galp Energia and Eni SPA go up and down completely randomly.
Pair Corralation between Galp Energia and Eni SPA
Assuming the 90 days horizon Galp Energia SGPS is expected to under-perform the Eni SPA. In addition to that, Galp Energia is 2.39 times more volatile than Eni SpA ADR. It trades about -0.2 of its total potential returns per unit of risk. Eni SpA ADR is currently generating about -0.14 per unit of volatility. If you would invest 2,996 in Eni SpA ADR on August 24, 2024 and sell it today you would lose (107.00) from holding Eni SpA ADR or give up 3.57% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Galp Energia SGPS vs. Eni SpA ADR
Performance |
| Timeline |
| Galp Energia SGPS |
| Eni SpA ADR |
Galp Energia and Eni SPA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Galp Energia and Eni SPA
The main advantage of trading using opposite Galp Energia and Eni SPA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galp Energia position performs unexpectedly, Eni SPA 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 Eni SPA will offset losses from the drop in Eni SPA's long position.| Galp Energia vs. Equinor ASA ADR | Galp Energia vs. TotalEnergies SE ADR | Galp Energia vs. Ecopetrol SA ADR | Galp Energia vs. National Fuel Gas |
| Eni SPA vs. TotalEnergies SE ADR | Eni SPA vs. Ecopetrol SA ADR | Eni SPA vs. Shell PLC ADR | Eni SPA vs. Petroleo Brasileiro Petrobras |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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