Correlation Between Suncor Energy and Galp Energa

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

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

Diversification Opportunities for Suncor Energy and Galp Energa

-0.43

Correlation Coefficient

Suncor Energy  Galp Energa

Very good diversification

The 3 months correlation between Suncor and Galp is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Suncor Energy and Galp Energa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galp Energa and Suncor Energy 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 Suncor Energy are associated (or correlated) with Galp Energa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galp Energa has no effect on the direction of Suncor Energy i.e., Suncor Energy and Galp Energa go up and down completely randomly.

Pair Corralation between Suncor Energy and Galp Energa

Allowing for the 90-day total investment horizon Suncor Energy is expected to generate 1.01 times more return on investment than Galp Energa. However, Suncor Energy is 1.01 times more volatile than Galp Energa. It trades about -0.02 of its potential returns per unit of risk. Galp Energa is currently generating about -0.07 per unit of risk. If you would invest  3,682  in Suncor Energy on September 20, 2024 and sell it today you would lose (98.00) from holding Suncor Energy or give up 2.66% of portfolio value over 90 days.

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

Suncor Energy  vs.  Galp Energa

Suncor Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Suncor Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Suncor Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Galp Energa

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galp Energa has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Suncor Energy and Galp Energa

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

The idea behind Suncor Energy and Galp Energa 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.