Correlation Between Equinor ASA and Galp Energa
Can any of the company-specific risk be diversified away by investing in both Equinor ASA 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 Equinor ASA and Galp Energa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equinor ASA and Galp Energa, you can compare the effects of market volatilities on Equinor ASA 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 Equinor ASA with a short position of Galp Energa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equinor ASA and Galp Energa.
Diversification Opportunities for Equinor ASA and Galp Energa
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Equinor and Galp is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Equinor ASA and Galp Energa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energa and Equinor ASA 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 Equinor ASA 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 Equinor ASA i.e., Equinor ASA and Galp Energa go up and down completely randomly.
Pair Corralation between Equinor ASA and Galp Energa
Assuming the 90 days horizon Equinor ASA is expected to generate 1.21 times more return on investment than Galp Energa. However, Equinor ASA is 1.21 times more volatile than Galp Energa. It trades about 0.22 of its potential returns per unit of risk. Galp Energa is currently generating about 0.1 per unit of risk. If you would invest 2,250 in Equinor ASA on October 24, 2024 and sell it today you would earn a total of 184.00 from holding Equinor ASA or generate 8.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equinor ASA vs. Galp Energa
Performance |
| Timeline |
| Equinor ASA |
| Galp Energa |
Equinor ASA and Galp Energa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equinor ASA and Galp Energa
The main advantage of trading using opposite Equinor ASA and Galp Energa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinor ASA 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.| Equinor ASA vs. China Petroleum Chemical | Equinor ASA vs. Galp Energa | Equinor ASA vs. Exxon Mobil Corp | Equinor ASA vs. Eni SpA |
| Galp Energa vs. BP PLC ADR | Galp Energa vs. TotalEnergies SE ADR | Galp Energa vs. Chevron Corp | Galp Energa vs. Exxon Mobil Corp |
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 Valuation module to check real value of public entities based on technical and fundamental data.
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