Correlation Between Apple and GALP ENERGIA

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

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

Diversification Opportunities for Apple and GALP ENERGIA

-0.28

Correlation Coefficient

Apple  GALP ENERGIA

Very good diversification

The 3 months correlation between Apple and GALP is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc 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 Apple 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 Apple Inc 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 Apple i.e., Apple and GALP ENERGIA go up and down completely randomly.

Pair Corralation between Apple and GALP ENERGIA

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.51 times more return on investment than GALP ENERGIA. However, Apple Inc is 1.96 times less risky than GALP ENERGIA. It trades about 0.65 of its potential returns per unit of risk. GALP ENERGIA B is currently generating about 0.16 per unit of risk. If you would invest  21,700  in Apple Inc on September 21, 2024 and sell it today you would earn a total of  2,650  from holding Apple Inc or generate 12.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Apple Inc  vs.  GALP ENERGIA B

Apple Inc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 rather sound basic indicators, GALP ENERGIA is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Apple and GALP ENERGIA

The main advantage of trading using opposite Apple and GALP ENERGIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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 Apple Inc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.