Correlation Between Galp Energia and NOS SGPS

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

Diversification Opportunities for Galp Energia and NOS SGPS

0.36

Correlation Coefficient

Galp Energia  NOS SGPS

Weak diversification

The 3 months correlation between Galp and NOS is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Galp Energia SGPS and NOS SGPS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOS SGPS SA 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 NOS SGPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOS SGPS SA has no effect on the direction of Galp Energia i.e., Galp Energia and NOS SGPS go up and down completely randomly.

Pair Corralation between Galp Energia and NOS SGPS

Assuming the 90 days trading horizon Galp Energia SGPS is expected to generate 1.2 times more return on investment than NOS SGPS. However, Galp Energia is 1.2 times more volatile than NOS SGPS SA. It trades about 0.25 of its potential returns per unit of risk. NOS SGPS SA is currently generating about -0.04 per unit of risk. If you would invest  1,345  in Galp Energia SGPS on April 24, 2025 and sell it today you would earn a total of  333.00  from holding Galp Energia SGPS or generate 24.76% return on investment over 90 days.

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

Galp Energia SGPS  vs.  NOS SGPS SA

Galp Energia SGPS

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Galp Energia SGPS are ranked lower than 19 (%) 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.

NOS SGPS SA

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Galp Energia and NOS SGPS

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

The idea behind Galp Energia SGPS and NOS SGPS SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.