Correlation Between Galp Energia and Shell PLC

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

Diversification Opportunities for Galp Energia and Shell PLC

0.68

Correlation Coefficient

Galp Energia  Shell PLC

Poor diversification

The 3 months correlation between Galp and Shell is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energia SGPS and Shell PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC 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 Shell PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shell PLC has no effect on the direction of Galp Energia i.e., Galp Energia and Shell PLC go up and down completely randomly.

Pair Corralation between Galp Energia and Shell PLC

Assuming the 90 days horizon Galp Energia SGPS is expected to generate 1.31 times more return on investment than Shell PLC. However, Galp Energia is 1.31 times more volatile than Shell PLC. It trades about 0.13 of its potential returns per unit of risk. Shell PLC is currently generating about 0.05 per unit of risk. If you would invest  1,473  in Galp Energia SGPS on May 8, 2025 and sell it today you would earn a total of  412.00  from holding Galp Energia SGPS or generate 27.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Galp Energia SGPS  vs.  Shell PLC

Galp Energia SGPS

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Galp Energia SGPS are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Galp Energia reported solid returns over the last few months and may actually be approaching a breakup point.

Shell PLC

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Shell PLC may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Galp Energia and Shell PLC

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

The idea behind Galp Energia SGPS and Shell PLC 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.