Correlation Between Aker Carbon and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both Aker Carbon and Equinor ASA 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 Aker Carbon and Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aker Carbon Capture and Equinor ASA, you can compare the effects of market volatilities on Aker Carbon and Equinor ASA 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 Aker Carbon with a short position of Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker Carbon and Equinor ASA.
Diversification Opportunities for Aker Carbon and Equinor ASA
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Aker and Equinor is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Aker Carbon Capture and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA and Aker Carbon 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 Aker Carbon Capture are associated (or correlated) with Equinor ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinor ASA has no effect on the direction of Aker Carbon i.e., Aker Carbon and Equinor ASA go up and down completely randomly.
Pair Corralation between Aker Carbon and Equinor ASA
Assuming the 90 days trading horizon Aker Carbon Capture is expected to under-perform the Equinor ASA. But the stock apears to be less risky and, when comparing its historical volatility, Aker Carbon Capture is 1.03 times less risky than Equinor ASA. The stock trades about -0.04 of its potential returns per unit of risk. The Equinor ASA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 25,774 in Equinor ASA on September 1, 2024 and sell it today you would earn a total of 946.00 from holding Equinor ASA or generate 3.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Aker Carbon Capture vs. Equinor ASA
Performance |
| Timeline |
| Aker Carbon Capture |
| Equinor ASA |
Aker Carbon and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aker Carbon and Equinor ASA
The main advantage of trading using opposite Aker Carbon and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker Carbon position performs unexpectedly, Equinor ASA 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 Equinor ASA will offset losses from the drop in Equinor ASA's long position.The idea behind Aker Carbon Capture and Equinor ASA 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.| Equinor ASA vs. DnB ASA | Equinor ASA vs. Mowi ASA | Equinor ASA vs. Yara International ASA | Equinor ASA vs. Telenor ASA |
Check out your portfolio center.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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