Correlation Between Galp Energia and TotalEnergies
Can any of the company-specific risk be diversified away by investing in both Galp Energia and TotalEnergies 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 TotalEnergies 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 TotalEnergies SE ADR, you can compare the effects of market volatilities on Galp Energia and TotalEnergies 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 TotalEnergies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galp Energia and TotalEnergies.
Diversification Opportunities for Galp Energia and TotalEnergies
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Galp and TotalEnergies is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energia SGPS and TotalEnergies SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TotalEnergies SE 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 TotalEnergies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TotalEnergies SE ADR has no effect on the direction of Galp Energia i.e., Galp Energia and TotalEnergies go up and down completely randomly.
Pair Corralation between Galp Energia and TotalEnergies
Assuming the 90 days horizon Galp Energia SGPS is expected to under-perform the TotalEnergies. In addition to that, Galp Energia is 2.19 times more volatile than TotalEnergies SE ADR. It trades about -0.23 of its total potential returns per unit of risk. TotalEnergies SE ADR is currently generating about -0.39 per unit of volatility. If you would invest 6,470 in TotalEnergies SE ADR on August 28, 2024 and sell it today you would lose (644.00) from holding TotalEnergies SE ADR or give up 9.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Galp Energia SGPS vs. TotalEnergies SE ADR
Performance |
| Timeline |
| Galp Energia SGPS |
| TotalEnergies SE ADR |
Galp Energia and TotalEnergies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Galp Energia and TotalEnergies
The main advantage of trading using opposite Galp Energia and TotalEnergies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galp Energia position performs unexpectedly, TotalEnergies 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 TotalEnergies will offset losses from the drop in TotalEnergies' 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 |
| TotalEnergies vs. BP PLC ADR | TotalEnergies vs. Chevron Corp | TotalEnergies vs. Exxon Mobil Corp | TotalEnergies vs. Equinor ASA 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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