Correlation Between Galp Energa and BP PLC
Can any of the company-specific risk be diversified away by investing in both Galp Energa and BP PLC 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 Energa and BP PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Galp Energa and BP PLC ADR, you can compare the effects of market volatilities on Galp Energa and BP PLC 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 Energa with a short position of BP PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galp Energa and BP PLC.
Diversification Opportunities for Galp Energa and BP PLC
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Galp and BP PLC is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energa and BP PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC ADR and Galp Energa 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 Energa are associated (or correlated) with BP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP PLC ADR has no effect on the direction of Galp Energa i.e., Galp Energa and BP PLC go up and down completely randomly.
Pair Corralation between Galp Energa and BP PLC
Assuming the 90 days horizon Galp Energa is expected to under-perform the BP PLC. But the pink sheet apears to be less risky and, when comparing its historical volatility, Galp Energa is 1.04 times less risky than BP PLC. The pink sheet trades about -0.22 of its potential returns per unit of risk. The BP PLC ADR is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 3,081 in BP PLC ADR on August 24, 2024 and sell it today you would lose (129.00) from holding BP PLC ADR or give up 4.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Galp Energa vs. BP PLC ADR
Performance |
| Timeline |
| Galp Energa |
| BP PLC ADR |
Galp Energa and BP PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Galp Energa and BP PLC
The main advantage of trading using opposite Galp Energa and BP PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galp Energa position performs unexpectedly, BP PLC 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 BP PLC will offset losses from the drop in BP PLC's long position.| Galp Energa vs. Shell PLC ADR | Galp Energa vs. Equinor ASA ADR | Galp Energa vs. BP PLC ADR | Galp Energa vs. Eni SpA ADR |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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