Correlation Between Galp Energia and Inapa Inv

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

Diversification Opportunities for Galp Energia and Inapa Inv

-0.32

Correlation Coefficient

Galp Energia  Inapa Inv

Very good diversification

The 3 months correlation between Galp and Inapa is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energia SGPS and Inapa Inv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inapa Inv 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 Inapa Inv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inapa Inv has no effect on the direction of Galp Energia i.e., Galp Energia and Inapa Inv go up and down completely randomly.

Pair Corralation between Galp Energia and Inapa Inv

Assuming the 90 days trading horizon Galp Energia SGPS is expected to generate 0.59 times more return on investment than Inapa Inv. However, Galp Energia SGPS is 1.68 times less risky than Inapa Inv. It trades about 0.06 of its potential returns per unit of risk. Inapa Inv is currently generating about 0.0 per unit of risk. If you would invest  1,443  in Galp Energia SGPS on January 20, 2024 and sell it today you would earn a total of  166.00  from holding Galp Energia SGPS or generate 11.5% return on investment over 90 days.

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

Galp Energia SGPS  vs.  Inapa Inv

Galp Energia SGPS

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Galp Energia SGPS are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Galp Energia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Inapa Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inapa Inv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Galp Energia and Inapa Inv

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

The idea behind Galp Energia SGPS and Inapa Inv 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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.