Correlation Between PetroChina and Galp Energia
Can any of the company-specific risk be diversified away by investing in both PetroChina and Galp Energia 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 PetroChina and Galp Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetroChina Co Ltd and Galp Energia SGPS, you can compare the effects of market volatilities on PetroChina and Galp Energia 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 PetroChina with a short position of Galp Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetroChina and Galp Energia.
Diversification Opportunities for PetroChina and Galp Energia
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PetroChina and Galp is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding PetroChina Co Ltd and Galp Energia SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energia SGPS and PetroChina 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 PetroChina Co Ltd are associated (or correlated) with Galp Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galp Energia SGPS has no effect on the direction of PetroChina i.e., PetroChina and Galp Energia go up and down completely randomly.
Pair Corralation between PetroChina and Galp Energia
Assuming the 90 days horizon PetroChina Co Ltd is expected to generate 0.94 times more return on investment than Galp Energia. However, PetroChina Co Ltd is 1.06 times less risky than Galp Energia. It trades about -0.01 of its potential returns per unit of risk. Galp Energia SGPS is currently generating about -0.23 per unit of risk. If you would invest 72.00 in PetroChina Co Ltd on August 28, 2024 and sell it today you would lose (1.00) from holding PetroChina Co Ltd or give up 1.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PetroChina Co Ltd vs. Galp Energia SGPS
Performance |
| Timeline |
| PetroChina |
| Galp Energia SGPS |
PetroChina and Galp Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PetroChina and Galp Energia
The main advantage of trading using opposite PetroChina and Galp Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetroChina position performs unexpectedly, Galp Energia 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 Energia will offset losses from the drop in Galp Energia's long position.| PetroChina vs. Equinor ASA ADR | PetroChina vs. TotalEnergies SE ADR | PetroChina vs. Ecopetrol SA ADR | PetroChina vs. National Fuel Gas |
| Galp Energia vs. Equinor ASA ADR | Galp Energia vs. TotalEnergies SE ADR | Galp Energia vs. Ecopetrol SA ADR | Galp Energia vs. National Fuel Gas |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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