Correlation Between Galp Energa and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both Galp Energa and Equinor ASA 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 Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Galp Energa and Equinor ASA, you can compare the effects of market volatilities on Galp Energa and Equinor ASA 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 Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galp Energa and Equinor ASA.
Diversification Opportunities for Galp Energa and Equinor ASA
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Galp and Equinor is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energa and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA 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 Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA has no effect on the direction of Galp Energa i.e., Galp Energa and Equinor ASA go up and down completely randomly.
Pair Corralation between Galp Energa and Equinor ASA
Assuming the 90 days horizon Galp Energa is expected to generate 1.51 times less return on investment than Equinor ASA. But when comparing it to its historical volatility, Galp Energa is 3.05 times less risky than Equinor ASA. It trades about 0.04 of its potential returns per unit of risk. Equinor ASA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,914 in Equinor ASA on August 24, 2024 and sell it today you would lose (455.00) from holding Equinor ASA or give up 15.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 91.53% |
| Values | Daily Returns |
Galp Energa vs. Equinor ASA
Performance |
| Timeline |
| Galp Energa |
| Equinor ASA |
Galp Energa and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Galp Energa and Equinor ASA
The main advantage of trading using opposite Galp Energa and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galp Energa position performs unexpectedly, Equinor ASA 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 Equinor ASA will offset losses from the drop in Equinor ASA'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 |
| Equinor ASA vs. China Petroleum Chemical | Equinor ASA vs. Galp Energa | Equinor ASA vs. Exxon Mobil Corp | Equinor ASA vs. Eni SpA |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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