Correlation Between Armada Hflr and GALP ENERGIA

Can any of the company-specific risk be diversified away by investing in both Armada Hflr 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 Armada Hflr and GALP ENERGIA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Armada Hflr Pr and GALP ENERGIA B , you can compare the effects of market volatilities on Armada Hflr 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 Armada Hflr with a short position of GALP ENERGIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and GALP ENERGIA.

Diversification Opportunities for Armada Hflr and GALP ENERGIA

0.09

Correlation Coefficient

Armada Hflr  GALP ENERGIA

Significant diversification

The 3 months correlation between Armada and GALP is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and GALP ENERGIA B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GALP ENERGIA B and Armada Hflr 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 Armada Hflr Pr 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 B has no effect on the direction of Armada Hflr i.e., Armada Hflr and GALP ENERGIA go up and down completely randomly.

Pair Corralation between Armada Hflr and GALP ENERGIA

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the GALP ENERGIA. But the stock apears to be less risky and, when comparing its historical volatility, Armada Hflr Pr is 1.27 times less risky than GALP ENERGIA. The stock trades about -0.12 of its potential returns per unit of risk. The GALP ENERGIA B is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,579  in GALP ENERGIA B on September 26, 2024 and sell it today you would earn a total of  30.00  from holding GALP ENERGIA B or generate 1.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Armada Hflr Pr  vs.  GALP ENERGIA B

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Armada Hflr is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

GALP ENERGIA B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GALP ENERGIA B has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, GALP ENERGIA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Armada Hflr and GALP ENERGIA

The main advantage of trading using opposite Armada Hflr and GALP ENERGIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hflr 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.

The idea behind Armada Hflr Pr and GALP ENERGIA B pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.