Correlation Between Galp Energa and Shell PLC

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

Diversification Opportunities for Galp Energa and Shell PLC

0.96

Correlation Coefficient

Galp Energa  Shell PLC

Almost no diversification

The 3 months correlation between Galp and Shell is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energa and Shell PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shell PLC ADR and Galp Energa 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 Energa 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 ADR has no effect on the direction of Galp Energa i.e., Galp Energa and Shell PLC go up and down completely randomly.

Pair Corralation between Galp Energa and Shell PLC

Assuming the 90 days horizon Galp Energa is expected to generate 1.53 times more return on investment than Shell PLC. However, Galp Energa is 1.53 times more volatile than Shell PLC ADR. It trades about 0.23 of its potential returns per unit of risk. Shell PLC ADR is currently generating about 0.12 per unit of risk. If you would invest  760.00  in Galp Energa on May 2, 2025 and sell it today you would earn a total of  204.00  from holding Galp Energa or generate 26.84% return on investment over 90 days.

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

Galp Energa  vs.  Shell PLC ADR

Galp Energa

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Galp Energa are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, Galp Energa showed solid returns over the last few months and may actually be approaching a breakup point.

Shell PLC ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shell PLC ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Shell PLC may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Galp Energa and Shell PLC

The main advantage of trading using opposite Galp Energa and Shell PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Galp Energa 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 Energa and Shell PLC ADR 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.