Correlation Between Jeronimo Martins and Galp Energia

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

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

Diversification Opportunities for Jeronimo Martins and Galp Energia

-0.65

Correlation Coefficient

Jeronimo Martins  Galp Energia

Excellent diversification

The 3 months correlation between Jeronimo and Galp is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Jeronimo Martins SGPS and Galp Energia SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energia SGPS and Jeronimo Martins 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 Jeronimo Martins SGPS are associated (or correlated) with Galp Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galp Energia SGPS has no effect on the direction of Jeronimo Martins i.e., Jeronimo Martins and Galp Energia go up and down completely randomly.

Pair Corralation between Jeronimo Martins and Galp Energia

Assuming the 90 days trading horizon Jeronimo Martins is expected to generate 38.28 times less return on investment than Galp Energia. But when comparing it to its historical volatility, Jeronimo Martins SGPS is 2.98 times less risky than Galp Energia. It trades about 0.02 of its potential returns per unit of risk. Galp Energia SGPS is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  1,518  in Galp Energia SGPS on January 25, 2024 and sell it today you would earn a total of  481.00  from holding Galp Energia SGPS or generate 31.69% return on investment over 90 days.

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

Jeronimo Martins SGPS  vs.  Galp Energia SGPS

Jeronimo Martins SGPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Jeronimo Martins SGPS 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.

Galp Energia SGPS

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Galp Energia SGPS are ranked lower than 15 (%) 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.

Pair Trading with Jeronimo Martins and Galp Energia

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

The idea behind Jeronimo Martins SGPS and Galp Energia SGPS 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.