Correlation Between GALP ENERGIA and Nippon Light
Can any of the company-specific risk be diversified away by investing in both GALP ENERGIA and Nippon Light 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 Nippon Light into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GALP ENERGIA B and Nippon Light Metal, you can compare the effects of market volatilities on GALP ENERGIA and Nippon Light 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 Nippon Light. Check out your portfolio center. Please also check ongoing floating volatility patterns of GALP ENERGIA and Nippon Light.
Diversification Opportunities for GALP ENERGIA and Nippon Light
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GALP and Nippon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding GALP ENERGIA B and Nippon Light Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nippon Light Metal 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 B are associated (or correlated) with Nippon Light. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nippon Light Metal has no effect on the direction of GALP ENERGIA i.e., GALP ENERGIA and Nippon Light go up and down completely randomly.
Pair Corralation between GALP ENERGIA and Nippon Light
Assuming the 90 days trading horizon GALP ENERGIA B is expected to under-perform the Nippon Light. In addition to that, GALP ENERGIA is 1.64 times more volatile than Nippon Light Metal. It trades about -0.16 of its total potential returns per unit of risk. Nippon Light Metal is currently generating about 0.06 per unit of volatility. If you would invest 940.00 in Nippon Light Metal on October 9, 2024 and sell it today you would earn a total of 10.00 from holding Nippon Light Metal or generate 1.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
GALP ENERGIA B vs. Nippon Light Metal
Performance |
| Timeline |
| GALP ENERGIA B |
| Nippon Light Metal |
GALP ENERGIA and Nippon Light Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GALP ENERGIA and Nippon Light
The main advantage of trading using opposite GALP ENERGIA and Nippon Light positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GALP ENERGIA position performs unexpectedly, Nippon Light 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 Nippon Light will offset losses from the drop in Nippon Light's long position.| GALP ENERGIA vs. Apple Inc | GALP ENERGIA vs. Apple Inc | GALP ENERGIA vs. Apple Inc | GALP ENERGIA vs. Apple Inc |
| Nippon Light vs. Apple Inc | Nippon Light vs. Apple Inc | Nippon Light vs. Apple Inc | Nippon Light vs. Apple Inc |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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