Correlation Between TotalEnergies and Galp Energa
Can any of the company-specific risk be diversified away by investing in both TotalEnergies 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 TotalEnergies and Galp Energa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TotalEnergies SE and Galp Energa, you can compare the effects of market volatilities on TotalEnergies 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 TotalEnergies with a short position of Galp Energa. Check out your portfolio center. Please also check ongoing floating volatility patterns of TotalEnergies and Galp Energa.
Diversification Opportunities for TotalEnergies and Galp Energa
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between TotalEnergies and Galp is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Galp Energa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energa and TotalEnergies 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 TotalEnergies SE 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 TotalEnergies i.e., TotalEnergies and Galp Energa go up and down completely randomly.
Pair Corralation between TotalEnergies and Galp Energa
Assuming the 90 days horizon TotalEnergies SE is expected to generate 1.33 times more return on investment than Galp Energa. However, TotalEnergies is 1.33 times more volatile than Galp Energa. It trades about -0.05 of its potential returns per unit of risk. Galp Energa is currently generating about -0.13 per unit of risk. If you would invest 6,970 in TotalEnergies SE on August 24, 2024 and sell it today you would lose (906.00) from holding TotalEnergies SE or give up 13.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
TotalEnergies SE vs. Galp Energa
Performance |
| Timeline |
| TotalEnergies SE |
| Galp Energa |
TotalEnergies and Galp Energa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TotalEnergies and Galp Energa
The main advantage of trading using opposite TotalEnergies and Galp Energa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TotalEnergies 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.| TotalEnergies vs. Eni SpA | TotalEnergies vs. MOL PLC ADR | TotalEnergies vs. PetroChina Co Ltd | TotalEnergies vs. Equinor ASA |
| Galp Energa vs. Shell PLC ADR | Galp Energa vs. Equinor ASA ADR | Galp Energa vs. BP PLC ADR | Galp Energa vs. Eni SpA ADR |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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