Correlation Between GALP ENERGIA and GOODYEAR T

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

By analyzing existing cross correlation between GALP ENERGIA B and GOODYEAR T RUBBER, you can compare the effects of market volatilities on GALP ENERGIA and GOODYEAR T 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 GOODYEAR T. Check out your portfolio center. Please also check ongoing floating volatility patterns of GALP ENERGIA and GOODYEAR T.

Diversification Opportunities for GALP ENERGIA and GOODYEAR T

-0.58

Correlation Coefficient

GALP ENERGIA  GOODYEAR T

Excellent diversification

The 3 months correlation between GALP and GOODYEAR is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding GALP ENERGIA B and GOODYEAR T RUBBER in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GOODYEAR T RUBBER 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 B are associated (or correlated) with GOODYEAR T. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GOODYEAR T RUBBER has no effect on the direction of GALP ENERGIA i.e., GALP ENERGIA and GOODYEAR T go up and down completely randomly.

Pair Corralation between GALP ENERGIA and GOODYEAR T

Assuming the 90 days trading horizon GALP ENERGIA B is expected to under-perform the GOODYEAR T. But the stock apears to be less risky and, when comparing its historical volatility, GALP ENERGIA B is 2.03 times less risky than GOODYEAR T. The stock trades about -0.04 of its potential returns per unit of risk. The GOODYEAR T RUBBER is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  785.00  in GOODYEAR T RUBBER on September 28, 2024 and sell it today you would earn a total of  28.00  from holding GOODYEAR T RUBBER or generate 3.57% return on investment over 90 days.

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

GALP ENERGIA B   vs.  GOODYEAR T RUBBER

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.

GOODYEAR T RUBBER

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GOODYEAR T RUBBER are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, GOODYEAR T may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with GALP ENERGIA and GOODYEAR T

The main advantage of trading using opposite GALP ENERGIA and GOODYEAR T positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GALP ENERGIA position performs unexpectedly, GOODYEAR T 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 GOODYEAR T will offset losses from the drop in GOODYEAR T's long position.

The idea behind GALP ENERGIA B and GOODYEAR T RUBBER 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.