Correlation Between Galp Energa and Suncor Energy

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

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

Diversification Opportunities for Galp Energa and Suncor Energy

-0.51

Correlation Coefficient

Galp Energa  Suncor Energy

Excellent diversification

The 3 months correlation between Galp and Suncor is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energa and Suncor Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Suncor Energy and Galp Energa 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 Energa are associated (or correlated) with Suncor Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Suncor Energy has no effect on the direction of Galp Energa i.e., Galp Energa and Suncor Energy go up and down completely randomly.

Pair Corralation between Galp Energa and Suncor Energy

Assuming the 90 days horizon Galp Energa is expected to under-perform the Suncor Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Galp Energa is 1.02 times less risky than Suncor Energy. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Suncor Energy is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  3,686  in Suncor Energy on September 17, 2024 and sell it today you would lose (62.00) from holding Suncor Energy or give up 1.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Galp Energa  vs.  Suncor Energy

Galp Energa

Risk-Adjusted Performance

0 of 100

Very Weak

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

Suncor Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Galp Energa and Suncor Energy

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

The idea behind Galp Energa and Suncor Energy 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.