Correlation Between Galp Energia and SCIENCE IN

Can any of the company-specific risk be diversified away by investing in both Galp Energia and SCIENCE IN 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 SCIENCE IN 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 SCIENCE IN SPORT, you can compare the effects of market volatilities on Galp Energia and SCIENCE IN 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 SCIENCE IN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galp Energia and SCIENCE IN.

Diversification Opportunities for Galp Energia and SCIENCE IN

-0.61

Correlation Coefficient

Galp Energia  SCIENCE IN

Excellent diversification

The 3 months correlation between Galp and SCIENCE is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energia SGPS and SCIENCE IN SPORT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SCIENCE IN SPORT 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 SCIENCE IN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SCIENCE IN SPORT has no effect on the direction of Galp Energia i.e., Galp Energia and SCIENCE IN go up and down completely randomly.

Pair Corralation between Galp Energia and SCIENCE IN

Assuming the 90 days horizon Galp Energia SGPS is expected to under-perform the SCIENCE IN. But the stock apears to be less risky and, when comparing its historical volatility, Galp Energia SGPS is 2.01 times less risky than SCIENCE IN. The stock trades about -0.04 of its potential returns per unit of risk. The SCIENCE IN SPORT is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  27.00  in SCIENCE IN SPORT on September 17, 2024 and sell it today you would earn a total of  3.00  from holding SCIENCE IN SPORT or generate 11.11% return on investment over 90 days.

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

Galp Energia SGPS  vs.  SCIENCE IN SPORT

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 nearly stable basic indicators, Galp Energia is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

SCIENCE IN SPORT

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SCIENCE IN SPORT are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SCIENCE IN reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Galp Energia and SCIENCE IN

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

The idea behind Galp Energia SGPS and SCIENCE IN SPORT 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.