Correlation Between Galp Energia and Repsol SA

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

By analyzing existing cross correlation between Galp Energia SGPS and Repsol SA, you can compare the effects of market volatilities on Galp Energia and Repsol SA 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 Galp Energia with a short position of Repsol SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galp Energia and Repsol SA.

Diversification Opportunities for Galp Energia and Repsol SA

-0.57

Correlation Coefficient

Galp Energia  Repsol SA

Excellent diversification

The 3 months correlation between Galp and Repsol is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energia SGPS and Repsol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repsol SA and Galp Energia 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 Galp Energia SGPS are associated (or correlated) with Repsol SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repsol SA has no effect on the direction of Galp Energia i.e., Galp Energia and Repsol SA go up and down completely randomly.

Pair Corralation between Galp Energia and Repsol SA

If you would invest  1,609  in Galp Energia SGPS on September 15, 2024 and sell it today you would earn a total of  109.00  from holding Galp Energia SGPS or generate 6.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Galp Energia SGPS  vs.  Repsol SA

Galp Energia SGPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galp Energia SGPS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Repsol SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Repsol SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Repsol SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Galp Energia and Repsol SA

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

The idea behind Galp Energia SGPS and Repsol SA 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.