Correlation Between Aker BP and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both Aker BP 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 BP 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 BP ASA and Equinor ASA, you can compare the effects of market volatilities on Aker BP 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 BP with a short position of Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aker BP and Equinor ASA.
Diversification Opportunities for Aker BP and Equinor ASA
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aker and Equinor is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aker BP ASA and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA and Aker BP 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 BP ASA 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 BP i.e., Aker BP and Equinor ASA go up and down completely randomly.
Pair Corralation between Aker BP and Equinor ASA
Assuming the 90 days trading horizon Aker BP ASA is expected to generate 0.77 times more return on investment than Equinor ASA. However, Aker BP ASA is 1.3 times less risky than Equinor ASA. It trades about 0.1 of its potential returns per unit of risk. Equinor ASA is currently generating about 0.02 per unit of risk. If you would invest 21,885 in Aker BP ASA on August 29, 2024 and sell it today you would earn a total of 705.00 from holding Aker BP ASA or generate 3.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aker BP ASA vs. Equinor ASA
Performance |
| Timeline |
| Aker BP ASA |
| Equinor ASA |
Aker BP and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aker BP and Equinor ASA
The main advantage of trading using opposite Aker BP and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aker BP 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 BP ASA 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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