Correlation Between Sonae SGPS and Galp Energia
Can any of the company-specific risk be diversified away by investing in both Sonae SGPS 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 Sonae SGPS and Galp Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonae SGPS SA and Galp Energia SGPS, you can compare the effects of market volatilities on Sonae SGPS 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 Sonae SGPS with a short position of Galp Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonae SGPS and Galp Energia.
Diversification Opportunities for Sonae SGPS and Galp Energia
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sonae and Galp is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sonae SGPS SA 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 Sonae SGPS 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 Sonae SGPS SA 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 Sonae SGPS i.e., Sonae SGPS and Galp Energia go up and down completely randomly.
Pair Corralation between Sonae SGPS and Galp Energia
Assuming the 90 days trading horizon Sonae SGPS is expected to generate 20.68 times less return on investment than Galp Energia. But when comparing it to its historical volatility, Sonae SGPS SA is 1.61 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 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,027 in Galp Energia SGPS on August 29, 2024 and sell it today you would earn a total of 551.00 from holding Galp Energia SGPS or generate 53.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sonae SGPS SA vs. Galp Energia SGPS
Performance |
| Timeline |
| Sonae SGPS SA |
| Galp Energia SGPS |
Sonae SGPS and Galp Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonae SGPS and Galp Energia
The main advantage of trading using opposite Sonae SGPS and Galp Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonae SGPS 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.| Sonae SGPS vs. Banco Comercial Portugues | Sonae SGPS vs. NOS SGPS SA | Sonae SGPS vs. The Navigator | Sonae SGPS vs. Altri SGPS SA |
| Galp Energia vs. EDP Energias | Galp Energia vs. Sonae SGPS SA | Galp Energia vs. Banco Comercial Portugues | Galp Energia vs. NOS SGPS SA |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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