Correlation Between Origin Energy and Galp Energa
Can any of the company-specific risk be diversified away by investing in both Origin Energy and Galp Energa 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 Origin Energy and Galp Energa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Origin Energy Ltd and Galp Energa, you can compare the effects of market volatilities on Origin Energy and Galp Energa 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 Origin Energy with a short position of Galp Energa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Origin Energy and Galp Energa.
Diversification Opportunities for Origin Energy and Galp Energa
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Origin and Galp is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Origin Energy Ltd and Galp Energa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energa and Origin Energy 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 Origin Energy Ltd are associated (or correlated) with Galp Energa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galp Energa has no effect on the direction of Origin Energy i.e., Origin Energy and Galp Energa go up and down completely randomly.
Pair Corralation between Origin Energy and Galp Energa
Assuming the 90 days horizon Origin Energy Ltd is expected to generate 1.17 times more return on investment than Galp Energa. However, Origin Energy is 1.17 times more volatile than Galp Energa. It trades about 0.01 of its potential returns per unit of risk. Galp Energa is currently generating about -0.08 per unit of risk. If you would invest 660.00 in Origin Energy Ltd on December 10, 2024 and sell it today you would earn a total of 0.00 from holding Origin Energy Ltd or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Origin Energy Ltd vs. Galp Energa
Performance |
| Timeline |
| Origin Energy |
| Galp Energa |
Origin Energy and Galp Energa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Origin Energy and Galp Energa
The main advantage of trading using opposite Origin Energy and Galp Energa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Energy position performs unexpectedly, Galp Energa 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 Galp Energa will offset losses from the drop in Galp Energa's long position.| Origin Energy vs. BP plc | ||
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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