Correlation Between Galp Energa and Petroleo Brasileiro
Can any of the company-specific risk be diversified away by investing in both Galp Energa and Petroleo Brasileiro 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 Petroleo Brasileiro into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Galp Energa and Petroleo Brasileiro Petrobras, you can compare the effects of market volatilities on Galp Energa and Petroleo Brasileiro 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 Petroleo Brasileiro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galp Energa and Petroleo Brasileiro.
Diversification Opportunities for Galp Energa and Petroleo Brasileiro
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Galp and Petroleo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energa and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro 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 Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of Galp Energa i.e., Galp Energa and Petroleo Brasileiro go up and down completely randomly.
Pair Corralation between Galp Energa and Petroleo Brasileiro
Assuming the 90 days horizon Galp Energa is expected to under-perform the Petroleo Brasileiro. But the pink sheet apears to be less risky and, when comparing its historical volatility, Galp Energa is 1.17 times less risky than Petroleo Brasileiro. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Petroleo Brasileiro Petrobras is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,379 in Petroleo Brasileiro Petrobras on August 27, 2024 and sell it today you would earn a total of 100.00 from holding Petroleo Brasileiro Petrobras or generate 7.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Galp Energa vs. Petroleo Brasileiro Petrobras
Performance |
| Timeline |
| Galp Energa |
| Petroleo Brasileiro |
Galp Energa and Petroleo Brasileiro Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Galp Energa and Petroleo Brasileiro
The main advantage of trading using opposite Galp Energa and Petroleo Brasileiro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galp Energa position performs unexpectedly, Petroleo Brasileiro 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 Petroleo Brasileiro will offset losses from the drop in Petroleo Brasileiro'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 |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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