Correlation Between EAM Solar and Equinor ASA
Can any of the company-specific risk be diversified away by investing in both EAM Solar 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 EAM Solar and Equinor ASA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EAM Solar ASA and Equinor ASA, you can compare the effects of market volatilities on EAM Solar 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 EAM Solar with a short position of Equinor ASA. Check out your portfolio center. Please also check ongoing floating volatility patterns of EAM Solar and Equinor ASA.
Diversification Opportunities for EAM Solar and Equinor ASA
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between EAM and Equinor is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EAM Solar ASA and Equinor ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinor ASA and EAM Solar 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 EAM Solar 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 EAM Solar i.e., EAM Solar and Equinor ASA go up and down completely randomly.
Pair Corralation between EAM Solar and Equinor ASA
Assuming the 90 days trading horizon EAM Solar ASA is expected to under-perform the Equinor ASA. In addition to that, EAM Solar is 15.27 times more volatile than Equinor ASA. It trades about -0.05 of its total potential returns per unit of risk. Equinor ASA is currently generating about 0.15 per unit of volatility. If you would invest 25,408 in Equinor ASA on September 5, 2024 and sell it today you would earn a total of 1,717 from holding Equinor ASA or generate 6.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EAM Solar ASA vs. Equinor ASA
Performance |
| Timeline |
| EAM Solar ASA |
| Equinor ASA |
EAM Solar and Equinor ASA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EAM Solar and Equinor ASA
The main advantage of trading using opposite EAM Solar and Equinor ASA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EAM Solar 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.| EAM Solar vs. Aurskog Sparebank | EAM Solar vs. Sparebanken Ost | EAM Solar vs. Sunndal Sparebank | EAM Solar vs. SpareBank 1 stlandet |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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