Correlation Between Enlight Renewable and Galileo Tech

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

By analyzing existing cross correlation between Enlight Renewable Energy and Galileo Tech, you can compare the effects of market volatilities on Enlight Renewable and Galileo Tech 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 Enlight Renewable with a short position of Galileo Tech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enlight Renewable and Galileo Tech.

Diversification Opportunities for Enlight Renewable and Galileo Tech

0.25

Correlation Coefficient

Enlight Renewable  Galileo Tech

Modest diversification

The 3 months correlation between Enlight and Galileo is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Enlight Renewable Energy and Galileo Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galileo Tech and Enlight Renewable 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 Enlight Renewable Energy are associated (or correlated) with Galileo Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galileo Tech has no effect on the direction of Enlight Renewable i.e., Enlight Renewable and Galileo Tech go up and down completely randomly.

Pair Corralation between Enlight Renewable and Galileo Tech

Assuming the 90 days trading horizon Enlight Renewable Energy is expected to generate 0.32 times more return on investment than Galileo Tech. However, Enlight Renewable Energy is 3.12 times less risky than Galileo Tech. It trades about 0.02 of its potential returns per unit of risk. Galileo Tech is currently generating about -0.14 per unit of risk. If you would invest  583,000  in Enlight Renewable Energy on September 18, 2024 and sell it today you would earn a total of  3,900  from holding Enlight Renewable Energy or generate 0.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Enlight Renewable Energy  vs.  Galileo Tech

Enlight Renewable Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enlight Renewable Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Enlight Renewable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Galileo Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galileo Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Enlight Renewable and Galileo Tech

The main advantage of trading using opposite Enlight Renewable and Galileo Tech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enlight Renewable position performs unexpectedly, Galileo Tech 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 Galileo Tech will offset losses from the drop in Galileo Tech's long position.

The idea behind Enlight Renewable Energy and Galileo Tech 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.